Buy Mahindra Holidays & Resorts; target of Rs 487:Edelweiss

Edelweiss's research report on Mahindra Holidays & ResortsMahindra Holidays & Resorts’ (MHRL) Q3FY16 revenue at INR2.4bn and PAT at INR313mn came exactly in line with our estimates. Strong traction in membership addition continued in this quarter as well—3,879 added, up 32.5% YoY. Membership fees finally rose in Q3FY16 as the company increased Blue and White category prices ~5%. Management also stated that cancellations were on the down trend. Overall, robust growth in net member addition—sixth consecutive quarter of 20% plus spurt—bodes well for MHRL, and we anticipate this to sustain riding increasing members from digital & referrals and strong room addition pipeline. We roll forward to FY18E and maintain ‘BUY’ with revised TP of INR487 (INR439 earlier). Given MHRL’s focus on increasing share of members acquired via referral and digital route, we anticipate cancellations to moderate going forward. This, along with a pipeline of 700 room additions over the next 2 years, bodes well for strong growth in net member addition to sustain. We maintain ‘BUY’ with a revised target price of INR487 (INR439 earlier). We value MHRL using average DCF, P/E and EV/EBITDA methodologies, further reducing by INR22/share to incorporate unearned revenue. At CMP, the stock trades at 20.9x and 19.0x FY17E and FY18E EPS, respectively. For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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