Edelweiss is bullish on Mahindra Holidays and Resorts has recommended buy rating on the stock with a target price of Rs 425 in its research report dated November 02, 2017.
Edelweiss' research report on Mahindra Holidays and Resorts
MHRL added 3,705 members during Q2FY18, down 14% YoY. The decline in net member addition was primarily on account of its strategic focus on acquiring customers with proclivity towards making higher down payments. As part of this initiative, the company has also discontinued the 48-months EMI scheme for ‘Blue’ category memberships. As a result, VO income fell 14% YoY to INR 1.2bn, while ASF dipped 2% YoY to INR 542mn, resort income grew 17% YoY on higher room rentals and F&B.
Q2FY18 performance was below expectation as focus on acquiring quality members and increasing share of down payments will limit growth. We, therefore, adjust our member addition growth leading to 7%/6% cut in FY18/19E EPS. However, this bodes well for debtor reduction which was an issue with MHRL and improvement in same will be value accretive over long run. We value standalone business using average DCF and P/E with subsidiaries valued separately. We maintain ‘BUY’ with TP of INR 425 (INR 444 earlier).
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