Buy Cox & Kings; target of Rs 343: KRChoksey

KRChoksey research report on Cox & Kings

C&K reported revenue of Rs 739 crore (+26%, YoY) which is above our  expectation based on strong performance by Leisure India Rs 166 crore (+14%, YoY), Leisure International Rs 120 crore (+12%. YoY), Education Rs 252 crore (+37%, YoY), Meininger Rs 99 crore & camping Rs 90 crore (+1%, YoY). Education & Meininger have performed well as product mix. Management indicated overall 15% business growth outlook for Education business in FY15E. PGL business grew by 26% YoY and expected to perform at same level in current year.

EBITDA Rs 351 crore (+27%, YoY) led Leisure India Rs 102 crore (+13%, YoY), Leisure International Rs 27 crore (+17%. YoY), Education Rs 153 crore (+16%, YoY), Meininger Rs 49 crore (+113%, YoY) & camping Rs 24 crore (-38%, YoY). Better capacity utilization 75% and advance booking of Education business led to expansion of margins. Further, management indicated similar levels of capacity utilization for full year. International leisure business did well in Middle East and Europe and India business showed traction with Inbound business.

COXK is a leader in tourism industry with 30% market share in domestic outbound market & naturally beneficiary to government focus on tourism with burgeoning income level to middle class. Considering higher capacity utilizations in Education business, we change our consol EBITDA of Rs 864 crore & Rs 1004 crore (from Rs 833 crore & Rs 957 crore) for FY15E & FY16E financial and upgrade 7x EV/ EBITDA (from 6x) to Education business. We recommend ‘BUY” with TP of Rs 343.

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