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Taj GVK
Taj GVK
Taj GVK
TajGVK
Performance Highlights
Y/E March (` cr) Net sales Operating profit OPM (%) Net profit 1QFY2012 4QFY2011 % chg (qoq) 1QFY2011 % chg (yoy) 58.9 20.4 34.7 12.0 69.1 27.1 39.2 12.9 (14.8) (24.5) (444)bp (6.7) 60.6 22.4 37.0 10.1 (2.9) (8.9) (230)bp 18.9
BUY
CMP Target Price
Investment Period
Stock Info Sector Market Cap (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Hotels 657 0.7 177/91 24,507 2 19,136 5,750 TAJG.BO TAJG@IN
`99 `140
12 Months
TajGVK reported a 2.9% yoy decline in its top line to `59cr (`61cr) for 1QFY2012. OPM came in at 34.7%, as against 37.0% in 1QFY2011, down 230bp yoy. Occupancy rates (OR), especially for Hyderabad, dipped during the quarter due to political unrest in the city. Chandigarh hotels showed strong improvement over the previous quarter, with the overall OR improving to 75% for the quarter, while average room rate (ARR) came in at `7,000. We are positive on the outlook of the company, given that the key markets of the company, Hyderabad and Chennai, are showing signs of stabilising. We maintain our Buy recommendation on the stock. OR at 60%: TajGVK reported an average OR of 60% for 1QFY2012, which declined from 72% in 4QFY2011 because of the lean season. In Hyderabad, the OR dipped to 56% because of high inventory and political unrest in the city. Taj Krishna reported an OR of 63%, with an ARR of `7,500. Chennais OR increased yoy to 63% largely due to business shifting from Hyderabad to Chennai during the quarter. Chandigarh hotels ARR and OR stood at `5,200 and 63%, respectively. Outlook and valuation: We maintain our positive outlook on the entire hotel industry, as increasing foreign tourist arrivals (FTA) and economic growth will lead to a further increase in demand for hotel rooms. TajGVK is expected to benefit from the addition of its 189-room property in Begumpet, which will take its owned rooms to 1,086 from 897 currently. The stock is currently trading at attractive valuations of 10.4x and 8.5x its FY2012E and FY2013E EPS, respectively. We have valued the stock at 12x its FY2013E earnings. We maintain our Buy view on the stock with a target price of `140.
Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 75.0 9.6 1.3 14.1
3m 4.0
1yr 9.3
(7.5) (37.7)
Key financials
Y/E March (` cr) Net Sales % chg Net Profit % chg EBITDA Margin (%) EPS (Rs) P/E (x) P/BV (x) RoE (%) RoCE (%) EV / Sales (x) EV/Room (` cr) EV/EBITDA (x)
Source: Company, Angel Research
FY2010 228.3 (3.9) 36.3 (31.3) 37.6 5.8 17.1 2.1 12.9 15.4 3.3 0.8 8.7
FY2011E 259.3 13.6 43.3 19.5 37.1 6.9 14.3 1.9 14.1 16.5 2.9 0.8 7.9
FY2012E 310.0 19.6 59.7 37.8 40.4 9.5 10.4 1.7 17.3 20.1 2.4 0.7 5.9
FY2013E 359.6 16.0 73.4 22.9 40.6 11.7 8.5 1.4 18.3 22.3 1.9 0.6 4.7
Sharan Lillaney
+91 22 3935 7800 Ext: 6811 Sharanb.lillaney@angelbroking.com
1QFY2012 58.9 5.6 9.5 11.9 20.2 5.3 9.1 15.6 26.5 38.4 20.4 34.7 2.9 5.0 0.1 12.6 21.4 0.6 4.5 12.0 20.4 6.3 1.9 12.0
4QFY2011 69.1 6.4 9.3 11.5 16.7 5.2 7.5 18.9 27.4 42.0 27.1 39.2 2.7 5.3 0.6 19.7 28.6 6.8 34.7 12.9 18.7 6.3 2.1 12.9
% chg (qoq) (14.8) (12.6) 3.2 2.9 (17.5) (8.6) (24.5) (444)bp (4.8) (36.2) (91.6) (6.7) 176bp (6.7) (6.7)
1QFY2011 60.6 5.9 9.7 11.2 18.6 5.2 8.6 15.8 26.1 38.1 22.4 37.0 2.6 5.0 0.4 15.2 25.0 5.0 33.3 10.1 16.7 6.3 1.6 10.1
% chg (yoy) (2.9) (4.3) 5.6 1.8 (1.3) 0.7 (8.9) (230)bp (0.6) (16.9) (88.7) 18.9 374bp 18.9 18.9
FY2011 259.3 25.2 9.7 46.8 18.0 21.0 8.1 70.1 27.0 163.0 96.3 37.1 11.3 20.6 1.4 65.7 25.4 22.4 34.1 43.3 16.7 6.3 6.9 43.3
FY2010 228.3 21.2 9.3 41.0 18.0 18.6 8.1 61.7 27.0 142.5 85.7 37.6 12.2 19.6 1.0 54.9 24.1 18.7 34.0 36.3 15.9 6.3 5.8 36.3
% chg 13.6 18.9 14.1 12.6 13.5 14.4 12.3 (43)bp 5.1 19.7 19.9 19.5 83bp 19.5 19.5
(` cr)
30 20 10 0
2QFY10
3QFY10
4QFY10
1QFY11
2QFY11
3QFY11
4QFY11
Sales (LHS)
Source: Company, Angel Research
(` cr)
1QFY12
15 10 5 0
2QFY10
3QFY10
4QFY10
1QFY11
2QFY11
3QFY11
4QFY11
EBITDA (LHS)
Source: Company, Angel Research
OPM (RHS)
1QFY12
(%)
(%)
40
(` cr)
8 6 4 2 0
2QFY10
3QFY10
4QFY10
1QFY11
2QFY11
3QFY11
4QFY11
1QFY12
Investment arguments
Strengthening its foothold in the Hyderabad market: TajGVK is the market leader in the Hyderabad market, where it has a share of nearly 30% in premium-segment rooms. The company is coming up with a 189-room property in Begumpet to strengthen its foothold further and to tap mid-market room demand. The company also plans to add service apartments and retail space in its existing Taj Krishna property. We believe TajGVK would emerge as a prime beneficiary in Hyderabad after the expansion. Diversification strategy to de-risk the business model: In FY2008, 78% of TajGVK's room inventory was located in Hyderabad. To diversify its presence, the company came up with Taj Mount Road in Chennai in December 2008. With this, the company has toned down Hyderabads concentration to 59% of the total room inventory in FY2009. The company is also planning to enter Bengaluru and is exploring the possibility of entering the mid-market segment through tie-ups with IHCL's Ginger. We believe this strategy will prove beneficial in the long run, as it would reduce over-exposure in the Hyderabad market. Asset-light strategy to keep the balance sheet healthy: TajGVK is adding 189 rooms at its Begumpet property, using an asset-light strategy. This would require a lower capital outlay as compared to a greenfield expansion, and we expect the company's debt-equity ratio to be at a comfortable level of 0.2x in FY2013E, which provides TajGVK with adequate room to plan further expansions, without hampering its balance sheet quality.
250.0 200.0 150.0 100.0 50.0 0.0 Jul-05 Jul-06 Price Jul-07 9x Jul-08 12x Jul-09 15x Jul-10 Jul-11 18x 21x
Balance sheet
Y/E March (` cr) SOURCES OF FUNDS Equity Share Capital Reserves& Surplus Shareholders Funds Total Loans Deferred Tax Liability Total Liabilities APPLICATION OF FUNDS Gross Block Less: Acc. Depreciation Net Block Capital Work-in-Progress Current Assets Cash Loans & Advances Other Current liabilities Net Current Assets Mis. Exp. not written off Total Assets 269 76 193 139 50 11 30 9 67 (17) 2 316 463 89 374 69 33 2 20 11 55 (23) 2 422 483 107 375 84 36 3 22 11 63 (27) 2 434 492 128 364 124 46 5 26 14 54 (8) 1 482 667 152 514 20 63 14 31 18 78 (15) 1 520 707 181 525 20 74 14 39 21 89 (14) 1 532 13 220 233 74 9 316 13 258 271 139 12 422 13 280 293 125 16 434 13 309 321 141 19 482 13 357 370 131 19 520 13 420 432 81 19 532 FY08 FY09 FY10 FY11 FY12E FY13E
Key ratios
Y/E March Valuation Ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Room (` cr.) EV/Sales EV/EBITDA EV / Total Assets Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value DuPont Analysis EBIT margin Tax retention ratio Asset turnover (x) ROIC (Post-tax) Cost of Debt (Post Tax) Leverage (x) Operating ROE Returns (%) ROCE (Pre-tax) Angel ROIC (Pre-tax) ROE Turnover ratios (x) Asset Turnover (Gross Block) Inventory / Sales (days) Receivables (days) Payables (days) Working capital cycle (ex-cash) (days) Solvency ratios (x) Net debt to equity Net debt to EBITDA Interest Coverage (EBIT / Interest) 0.3 0.5 38.7 0.5 1.4 13.1 0.4 1.4 5.4 0.4 1.4 6.7 0.3 0.9 8.6 0.2 0.5 16.0 1.0 5 8 179 (41) 0.6 6 9 164 (41) 0.5 7 11 152 (44) 0.5 6 12 131 (30) 0.5 6 13 130 (25) 0.5 7 13 143 (29) 37.5 65.8 33.6 23.6 24.8 20.9 15.4 19.1 12.9 16.5 21.5 14.1 20.1 20.7 17.3 22.3 23.5 18.3 42.5 65.0 0.8 22.5 2.5 0.3 27.8 36.7 64.4 0.6 13.3 4.0 0.4 17.0 29.0 66.0 0.5 10.0 6.1 0.5 11.9 29.2 65.9 0.5 10.4 5.6 0.4 12.4 32.5 66.0 0.6 12.8 5.7 0.4 15.4 32.6 66.0 0.7 14.5 4.5 0.2 16.8 11.2 11.2 13.1 3.2 37.1 8.4 8.4 10.6 2.0 43.2 5.8 5.8 8.9 2.0 46.7 6.9 6.9 10.2 1.0 51.3 9.5 9.5 13.4 1.6 59.0 11.7 11.7 16.3 1.6 68.9 8.8 7.6 2.7 3.2 0.8 2.7 5.7 2.2 11.8 9.3 2.3 2.0 0.8 3.2 7.5 1.8 17.1 11.1 2.1 2.0 0.8 3.3 8.7 1.7 14.3 9.7 1.9 1.0 0.8 2.9 7.9 1.6 10.4 7.4 1.7 1.6 0.7 2.4 5.9 1.4 8.5 6.1 1.4 1.6 0.6 1.9 4.7 1.3 FY08 FY09 FY10 FY11 FY12E FY13E
10
E-mail: research@angelbroking.com
Website: www.angelbroking.com
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Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered
TajGVK No No No No
Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors
Ratings (Returns):
11