Buy Cox & Kings; target of Rs 395: Sharekhan

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26 Aug, 2025 12:21

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"Cox & Kings (CKL) registered a 12% revenue growth and an 8% growth in the operating profit on a like-to-like basis (excluding the hived-off camping business’ financials). The Indian business’ revenues and operating profit grew by 17% each while the education business revenues grew by 10% and profits grew by 19% on a Y-o-Y basis. The international leisure travel business was a drag on the profitability with its OPM declining by above 400BPS (due to higher promotional and technology expenses).

With improving consumer sentiment, CKL’s management expects the domestic outbound tourism segment (accounts for more than 50% of the Indian business) to grow by at least 25% in the near term. The capacity utilisation at the education and Meininger businesses is expected to improve in the coming years. This should help in expanding the OPM of CKL’s consolidated business to 40% in the coming years.

CKL’s net debt has reduced by Rs 730 crore from Rs 4,205 crore in March 2014. The company will further reduce its debt by about Rs250 crore by the end of FY2015. Going ahead, the management targets to reduce the debt by Rs500 crore each in FY2016 and FY2017 through internal accruals (which would result in savings of Rs 40 crore in interest cost each year).

We have marginally reduced our earnings estimate for FY2015 to factor in the lower margins in the international leisure travel business. However, we have broadly maintained our earnings estimates for FY2016 and FY2017. The stock is currently trading at 11.4x its FY2016E earnings and EV/EBIDTA of 8x. We maintain our Buy recommendation on the stock with a price target of Rs 395", says Sharekhan research report.

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