Accumulate Thomas Cook; target of Rs 64: GEPL Capital

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Accumulate Thomas Cook; target of Rs 64: GEPL Capital

GEPL Capital is bullish on Thomas Cook (India) and has recommended accumulate rating on the stock with a target of Rs 64 in its February 21, 2012 research report.

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GEPL Capital is bullish on Thomas Cook (India) and has recommended accumulate rating on the stock with a target of Rs 64 in its February 21, 2012 research report.

"Thomas Cook India Ltd. (TCIL) witnessed a 30.8% Y-o-Y growth in revenues to Rs873 mn driven by a 37.2% Y-o-Y growth in travel related services and a 17.2% Y-o-Y de-growth in financial services. As a result of the cost saving measures in terms of advertising and staff cost, the EBITDA grew by 74% Y-o-Y to Rs96 mn and the EBITDA margin improved by 272bps to 11% in Q4CY11. Driven by the higher EBTDA margin and a low base of last year, the net profit grew by 160.9% Y-o-Y to Rs40 mn."

"The international revenues grew by 210% Y-o-Y to Rs135 mn in Q4CY11. This led to the revenue contribution from Rest of World (RoW) rising to 15.5% in Q4CY11 from 6.5% in Q4CY10. With the strong rise in revenues the international business also witnessed a turnaround in Q4CY11 with an EBIT of Rs9 mn in Q4CY11 as compared to an EBIT loss of Rs126 mn in Q4CY10. The financial services de-grew by 51% in Q4CY11 to Rs27 mn led by the rupee depreciation over the last one year. Consequently the EBIT margin in the segment declined to 42.4% in Q4CY11 as compared to 71.7% in Q4CY10. On the other hand, the travel related services grew by 59% Y-o-Y to Rs210 mn in Q4CY11. Driven by strong growth in the outbound segment despite high base, the EBIT margin in the travel related segment grew to 25.9% in Q4CY11 from 22.3% in QCY10. TCIL reported a 17.6% Y-o-Y growth in revenues to Rs3.74 bn in CY11 driven by a 3% Y-o-Y rise in financial services to Rs435 mn and 19.9% Y-o-Y growth in travel related services to Rs3.3 bn. However; the higher growth in staff and other expenses led to the EBITDA margin declining by 30bps to 23.7%. Owing to a higher interest outflow the net profit growth was a tad lower, though above our estimates at Rs553 mn."

"TCIL is currently trading at 20.7x CY12E EPS and 18.7x CY13E EPS post the recent run-up in the stock. Though the stock has seen a sharp rise we believe the valuations are fair considering a) the growth potential in the business driven by the outbound segment, and b) the correction in the stock in CY10. Considering the promoters are looking at offloading their stake in the company, the price of which is unknown, we believe it to be the biggest trigger for the stock. A higher price can lead to further upside in the stock. We revise our target price upwards to Rs64.2 per share indicating an upside of 7%. We hence revise our rating to ACCUMULATE," says GEPL Capital research report.

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