Hold Taj GVK Hotels; target of Rs 86: ICICI Direct

ICIC IDirect's report on Taj GVK Hotels• Taj GVK reported a mixed set of Q2FY16 numbers. Revenues were in line with our estimates while EBITDA was below our expectation.• Revenues grew 1.6% YoY (down 3.1% QoQ) to Rs 60.2 crore vs. Idirect estimate of Rs 61.5 crore• On the margin front, the EBITDA margin declined 120 bps YoY (down 244 bps QoQ) to 18.7% (vs. I-direct estimate of 20.2%) due to higher employee expenses (up 12.0% YoY) and raw material cost (up 5.5% YoY)• The company reported a net loss of Rs 92 lakh (vs. I-direct estimate: net loss of Rs 86 lakh) due to a sharp increase in interest cost (up 25.2% YoY)Outlook and valuationsPost the resolution of the Telangana issue, the industry in the state is yet again hopeful of a resurgence in demand while new mega projects in the international airport and a few other high budget investments are expected to gain momentum once again. However, we believe, with the flood of room supply in the region, ARR and occupancy levels would take a little longer to return to the normal growth trajectory. Given this, we maintain our HOLD rating for the stock with a target price of Rs 86/share (i.e. at 14.0x FY17E EBITDA), says ICICI Direct research report. 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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