Dec 01, 2016 06:03 PM IST | Source:

Buy Cox & Kings; target of Rs 365: IIFL

IIFL is bullish on Cox & Kings has recommended buy rating on the stock with a target price of Rs 365 in its research report dated November 30, 2016.

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IIFL's research report on Cox & Kings

We cut FY17ii EPS by 29% to Rs 12.9 following the 2QFY17 earnings miss. However, the miss was driven entirely by an f/x loss, prompting us to leave FY18/19ii EPS unchanged at Rs 23.9/30.2. C&K’s operating performance in 2Q FY17 was steady: better-than-expected Ebitda from international leisure compensated for softness in education travel and Meininger due to Brexit/terror attacks. Ebitda before f/x losses, at Rs 2.9b, was in line with our estimate. However, an f/x loss of Rs 1.1b, principally due to revaluation of the USD loan book in the UK, led to a 35% miss on reported Ebitda.

For the India leisure travel business too, we assign a 10x EV/Ebitda multiple. This is consistent with the multiple at which C&K’s shares traded for a period of time before the Holiday break acquisition and is also broadly in line with the historical valuations of Thomas Cook India, whose core business is a close comparable for C&K. We think the growth potential of the India business justifies at least a 10x multiple. For the international leisure travel division, we assign a 6x EV/Ebitda multiple, consistent with the multiples paid by C&K and later by CVCI when acquiring Holiday break. Our SOTP suggests substantial room for upside in C&K’s share price predicated on continued healthy growth in revenue and Ebitda and continued de-leveraging. We roll forward our SOTP-based target price to Sep-2017 (from Mar-2017 previously), leading to an increase in TP to Rs 365 (from Rs 335 previously).

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