Apr 27, 2013, 07.15 PM | Source: Moneycontrol.com
Prabhudas Lilladher is bullish on Mahindra Holidays and Resorts India and has recommended a buy rating on the stock with a target of Rs 332 in its April 25, 2013 research report.
, Prabhudas Lilladher |
“Mahindra Holidays and Resorts India, Q4 witnessed a pick-up in member additions to 5526 members as against 4021 in Q3FY13. For the full year, MHRL added 17489 members as against 18089 in FY12. Going forward, the management expects an improving trajectory in member additions, given its initiatives of inventory addition, penetration into Tier 2 cities in India through third-party channel partners, entry into Dubai as well as focus on onsite member acquisitions. Average realizations dropped to Rs0.33m as against Rs0.38m in Q3FY13 as the company was testing its new 10-year product in the lower seasons. Hence, revenue growth stood at 8.7 percent sequentially at Rs1.87bn, in-line with expectations despite higher-than-expected member additions.”
“EBITDA margins declined 300bps sequentially and 100bps YoY to 20.3 percent. Although the company has been able to reduce member acquisition costs, expenses on ERP implementation, renovation expenses and increase in expenses on account of new resort additions resulted in declining margins. For FY13, margins improved by 120bps to 17.7 percent and the management is confident of improving margins, going forward.”
“MHRL added 238 rooms in Q4FY13 across five resorts - Dubai, Cherai Beach & Poovar in Kerela, Udaipur in Rajasthan and Virajpet in Coorg, Karnataka. For FY13, the total room additions stood at 431 rooms. Besides, the company has Greenfield projects underway that gives us a visibility of 500 rooms. This includes Kanha in Madhya Pradesh, Asanora in Goa, Naldhera in Himachal Pradesh and expansion at its Munnar resort. Besides, the company is also considering land acquisition for two projects, each of which shall add 200 rooms. We have valued MHRL on an ‘Average of DCF and PER’. At present, on account of capex, FCF generation is negligible. However, at the end of 25 years, when the rooms are re-sold to new members, FCF generation shall accelerate. The DCF value stands at Rs343. Although MHRL has a much stronger growth and returns profile, it trades at a PER of 16x FY15 as compared to 17x for its peers. At 17x FY15, the value stands at Rs321. Our target price of Rs332 is based on an average of the two values. We rate the stock ‘BUY’,” says Prabhudas Lilladher research report.
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