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Indian Hotels - Q1FY21 Result Update - ICICI Securities

Posted On: 2020-08-07 23:43:39

With the hotels business almost shut for the entire quarter, IHCL reported a very weak set of Q1FY21 numbers. However, significant fixed cost reduction helped the company to reduce losses for the quarter. IHCL registered a sharp decline of 86% YoY in revenues to Rs. 143.6 crore (vs. I-direct estimate: Rs. 244.8 crore). Average occupancy fell to 20.5% vs. 63.4% last year while ARR also dropped sharply by 47% YoY to Rs. 4848 for the quarter. Out of revenue of Rs. 143.6 crore, Rs. 55 crore of revenue generated through quarantine facilities, stay for medical professionals also had a negative impact on ARRs. On the other hand, online F&B initiatives like Qmin & H&H services showed good traction. The company reduced total operating expenditure by 51.6% YoY to Rs. 409 crore to bring down losses. EBITDA loss came in at Rs. 266 crore vs. I-direct estimate of EBITDA loss of Rs. 117 crore. IHCL secured significant lease rental waivers that led to cost saving of Rs. 52 crore for the quarter. Overall, the company reduced fixed costs by Rs. 90 crore while variable expenses declined by Rs. 365 crore (in line with reduction in the revenues). At present, there are ~6000 non-operational rooms in total. Occupancy levels of operational inventories are inching up gradually and are at 37%, at present. At the company level, occupancy levels are upwards of 20%. At 50% occupancy levels, IHCL believes it would get back to EBITDA break-even levels with minimised cost, going forward.

Valuation & Outlook

The sector outlook remains weak as the recovery would be slow and back ended. FY21 would most probably be a washout year for the sector. This prolonged recovery could pose a challenge. However, given the company's strong parentage and brand visibility along with meaningful cost optimisation measures initiated during the quarter, these concerns have now softened. We now upgrade the stock from REDUCE to HOLD with a target price of Rs. 80/share (i.e. 17x FY22E EV/EBITDA).

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Shares of INDIAN HOTELS CO.LTD. was last trading in BSE at Rs.78 as compared to the previous close of Rs. 77.7. The total number of shares traded during the day was 94239 in over 918 trades.

The stock hit an intraday high of Rs. 78.35 and intraday low of 77.3. The net turnover during the day was Rs. 7326664.

Source: Equity Bulls

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