Buy Cox & Kings; target of Rs 195: ICICIdirect.com

“Cox & Kings (C&K) have incorporated HBR’s peak season numbers (i.e. April-September period) into Q1FY13 numbers. This, in turn, led to robust revenue and PAT growth of 239% YoY and 284% YoY, respectively. C&K reported net revenues of | 532 crore vs. our estimated revenues of Rs 436.7 crore. The growth was mainly led by robust growth from the Indian operation (23% YoY growth) and sustained stable performance of the education division of HBR (40% of total revenues) leading to overall revenue growth of 8% YoY on a like-to-like basis. On the other hand, business of camping (14% of total revenues), HotelBreak and adventure divisions continued to get impacted due to a difficult operating environment in UK and other European regions. However, its impact on margins remained negligible due to improved margins of leisure division led by strong India business and stable margins in education division. With HBR’s peak season, stable margins and exchange fluctuation gain of Rs 71 crore, the company reported robust PAT growth of over 283% YoY.”

“The business of the education division (40% of revenue), a major contributor, continued to remain resilient and grew 9% YoY. The business of camping, adventure and HotelBreak have been affected due to difficult economic conditions in the UK & Netherlands and increase in local taxes in the key operational markets of France, Spain and Italy.”

“The company is raising nearly US$137.8 million (Rs 750 crore) through minority stake sale in its wholly-owned subsidiary Prometheon Holdings (UK) Ltd. The fund will be mainly utilised to retire part debt from Prometheon’s book, which we believe would further improve its profitability, going forward. We have valued the stock on an SOTP (i.e. 8x FY14E EV/EBITDA) basis and maintained BUY rating taking into account the long-term synergy with HBR and India’s growth potential,” says ICICIdirect.com research report.

Bodies Corporate holding more than 50% in Indian cos

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