Broking house, Sharekhan is bullish on Indian Hotels and has maintained buy rating on the stock with a target of Rs 175.

Sharekhan report on Indian Hotels:

FY2007 - consolidated results 

The FY2007 results of Indian Hotels Company (IHCL) are slightly above our expectations. IHCL has reported a profit after tax (PAT) of Rs 369.9 crore for FY2007 against our expectation of Rs 363 crore. However, on a stand-alone basis the FY2007 results are not comparable with those of FY2006 as the former take into account the effect of the merger of five companies into IHCL w.e.f. April 1, 2006. 

The total income for the year ended March 31, 2007 stood at Rs 2,665.8 crore as against Rs 1,914.1 crore for the year ended March 31, 2006. That implies a growth of 39%. The company has reported a PAT of Rs 369.9 crore for FY2007 compared with Rs 248.7 crore in FY2006, resulting in earnings per share of Rs 6.1.

Q4FY2007 - stand-alone results 

For Q4FY2007 IHCL has reported a top line growth of 39% at Rs 505.2 crore against Rs 363 crore in Q4FY2006. The other income for Q4FY2007 went up from Rs 8.36 crore in Q4FY2006 to Rs 33.71 crore and included the profit realised on the sale of an investment of Rs 16.7 crore as well as a foreign exchange gain. 

The occupancy rate in Q4FY2006 had been flat at 83% whereas the average room rate grew by 12% to Rs 11,082 in the quarter under review. 

The operating profit margin improved by 590 basis points from 36.1% in Q4FY2006 to 42.0% in Q4FY2007. The operating profit grew by 76% to Rs 245 crore in the fourth quarter. 

The interest cost rose from Rs 3.59 crore in Q4FY2006 to Rs 22.86 in Q4FY2007. This was higher primarily due to the regrouping of elements after the merger of the five companies into IHCL.

The bottom line of the company grew by a healthy 71% to Rs 134 crore in Q4FY2007 from Rs 78.7 crore in Q4FY2006; this resulted in earnings of Rs 2.23 per share.

The company has merged Asia Pacific Hotels, Indian Resort Hotels, Gateway Hotels and Getaway Resorts, Taj Lands End and Kuteeram Resorts Pvt Ltd into itself with effect from April 1, 2006. This has led to an addition of around 400 rooms to the existing inventory. The results for the year ended March 31, 2007 are therefore not comparable with those of the previous year.

At the current market price of Rs 145 the stock is quoting at a price/earnings ratio of 23x FY2007E consolidated earnings per share of Rs 6.2. We maintain our Buy recommendation on IHCL with price target of Rs 175.