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Limited downside in Royal Orchid: Ashish Chugh
Investment Analyst, Ashish Chugh is of the view that there is a limited downside in Royal Orchid Hotels from hereon. In the event of the economy recovering this stock is a contrarian buys today but they can move up smartly.
Chugh told CNBC-TV18, "Royal Orchid Hotels is a company belonging to a sector which is really not in fashion as of now. But I am banking on the fact that the worst maybe over for this company. The promoters have been acquiring their shares through creeping acquisitions. This company operates 12 hotel located in 6 cities. If you take a look at the financials of the company even though sales have increased from Rs 130 to Rs 140 crore, profit after tax is down to Rs 20 crore from Rs 32 crore. The company has also prone the dividend this year so I think this may not be one of the best years for the company but however given the fact that they have another hotel coming up in Ahmedabad, revenues are going to be significantly higher for the current financial year."
He further added, "The promoters have been buying the stock from the market through acquisition. They have increased their stake by roughly 1% in January to March quarter. This stock at the current price is trading at a significant discount to the average prices for the last three years, which is between 2005 and 2008. The stock was trading much higher, so I believe that the negative part of the thing is already build into the price and the downside looks restricted from hereon. In the event of the economy recovering I think these stocks are contrarian buys today but they can move up smartly."
Disclaimer: It is safe to assume that I have vested interest in the above stock.
