December 01, 2016 / 18:00 IST
The outlook for leisure India is expected to be positive as the company witnessed robust summer booking in the quarter. Further, improved consumer sentiments, pick-up in corporate travel, increased income from pay commission and OROP are expected to drive topline growth over the next two years. In addition, C&K should be a key beneficiary of any positive policy announcements (visa on arrival) given the new government’s thrust on tourism. However, increased competition in leisure India will adversely impact margins.
We have reduced our EPS estimate by 7.6% & 3.6% for FY17E & FY18E, respectively, to factor in a lean H2FY17 and poor performance in international operations. Further, elevated debt levels and higher cost are expected to keep margins under check. Accordingly, we have revised our target price downwards from Rs 200/share to Rs 180/ share (i.e. valuing at 7x FY18E EPS) and maintain our HOLD rating on the stock. Any major debt reduction remains a key trigger from a longer term perspective.
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