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Sell East India Hotel, target Rs 85: HDFC Sec
HDFC Securities has maintained sell rarting on East India Hotels with target price of Rs 85. We expect the key players to significantly benefit (EIH included) from the strong ARRs.
HDFC Securities has maintained sell rarting on East India Hotels with target price of Rs 85, in its December 17, 2007 report. "We have upgraded our ARR growth estimate for the industry in FY08E & FY09E to 12% & 6% from 9% & 2% earlier. We expect the key players to significantly benefit (EIH included) from the strong ARRs. However, much of this has been already priced in our profit estimates. We reiterate our Sell on EIH with the target price of Rs 85 for the following reasons. Earnings to compound a meager 11.9% against 18% for the industry . Considering the recent 9% dilution in equity (Rs 4 billion FCCB), the valuations are extremely steep at 38.9x FY08E & 29.4x FY09E, compared to that of IHC (19.5x & 17.3x) or Leela (15.4x & 14.5x) two years forward. It is trading at almost 2x the valuation of IHC, which is unwarranted. We believe, internal accruals would not be sufficient to fund its aggressive capex. Thus, there could be more equity dilutions in the offing," says HDFC Sec report.
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