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Last Updated : Feb 05, 2016 06:05 PM IST | Source:

Buy Thomas Cook; target of Rs 255: Sharekhan

Sharekhan is bullish on Thomas Cook Ind has recommended buy rating on the stock with a target price of Rs 255 in its research report dated February 4, 2016.

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Sharekhan's research report on Thomas Cook

TCIL’s consolidated revenues grew by 41.3% YoY to Rs1,044.0 crore in Q3FY2016 driven by a 33% revenue growth in core travel business revenues and 47% growth in human resource (HR) services business (Quess Corp). The operating profit margin (OPM) declined by 204BPS YoY to 4.3% largely on account of decline in the margin of financial services business, increase in contribution from HR services business and losses at EBIDTA level by vacation ownership business. The interest cost rose by 91% to Rs29.0 crore, which had an effect on PAT. The company has posted a loss of ~Rs2 crore at adjusted PAT level. However, excluding one-time impartment cost of Rs6.2 crore and acquisition related cost of Rs5.5 crore, the PAT at adjusted level would have been close to Rs10 crore. With sustained focus on improving the working capital, TCIL’s cash flows improved to Rs209.6 crore from Rs204.4 crore in the corresponding quarter last year

We re-iterate that FY2016 is a year of consolidation and restructuring of various acquired businesses for TCIL. The incorporation of Kuoni’s business and strongly growing HR services business will improve TCIL’s consolidated performance in FY2017 (larger benefits could be seen in FY2018 with stable global macro and currency environment). Also, the company is continuously focusing on improving its cash flows through better working capital management. We have marginally revised downwards our earnings estimates for FY2017 and FY2018 to factor in a lower-than-earlier-expected OPM. We have maintained our Buy recommendation on the stock with a revised price target of Rs255 (valuing at 13x its FY2018E EBIDTA).

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First Published on Feb 5, 2016 06:05 pm
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