Buy Taj GVK Hotels; target of Rs 197: Angel Broking

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Buy Taj GVK Hotels; target of Rs 197: Angel Broking

Angel Broking is bullish on Taj GVK Hotels & Resorts and has recommended buy rating on the stock with a target of Rs 197 in its February 7, 2011 research report.

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Angel Broking is bullish on Taj GVK Hotels & Resorts and has recommended buy rating on the stock with a target of Rs 197 in its February 7, 2011 research report.

"Taj GVK Hotels & Resorts reported top-line growth of 9.2% yoy to Rs 70 crore (Rs 64 crore), below our estimates of Rs 76 crore, primarily on account on lower-than-expected occupancy rates (OR) and average room rate (ARR) in Hyderabad hotels. OPM at 39.6% also came in below our estimates of 41.0%. PAT incroreeased by 5.9% yoy to Rs 13 crore (Rs 12 crore), as against our expectations of Rs 15 crore. Overall, OR incroreeased to 68%, compared to 64% in 3QFY2010. Going ahead, we expect the company to improve on its key operating parameters."

"Overall OR for the quarter came in at 68%, which grew from 64% in 3QFY2010. Hyderabad hotels reported OR of 67%, which was below our expectations. The Chandigarh hotel posted OR of 77%. Chennai hotel posted OR of 65% with ARR of ~Rs 5,200. Owing to lower-than-expected OR and ARR, OPM also remained 136bp below our estimates. PAT grew to Rs 12.9 crore during the quarter, backed by improved OR. However, PAT growth was only 5.9% yoy, below our expectations. In the recent quarters, the company has shown modest PAT growth. Going ahead, we expect this growth to be higher, on the back of robust sales growth and higher OPM."

"Going ahead, we expect the scenario for the entire hotel industry to improve, based on a positive demand-supply trend. The industry continues to witness a steady recovery, with an improvement in Foreign Tourist Arrivals (FTA) and the overall economy. TajGVK is expected to ride this recovery by adding a 189-room hotel in FY2012, incroreeasing its owned rooms to 1,086 from 897 currently. However, owing to below-expectation results, we have revised our top-line estimates for FY2011 and FY2012 downwards by 4.0% and 4.9% to Rs 266 crore and Rs 316 crore, respectively, and PAT estimates by 6.3% and 13.5% to Rs 45 crore and Rs 62 crore, respectively. At the CMP, the stock is trading at 15.5x and 11.3x its FY2011E and FY2012E PAT, respectively. We maintain Buy on the stock with a revised target price of Rs 197 (Rs 228)," says Angel Broking research report.

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