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Result Update: Mahindra Holidays & Resorts Ltd - BUY - TP Rs.315 - Kotak

Posted On: 2018-11-07 12:37:07

MHRIL Q2FY19 results was below our estimates (on like to like basis under old accounting standards) due to lower VO income and lower EBITDA margins. The company has adopted new accounting standard Ind AS 115 from 1st April 2018, due to which actual reported Q2FY19 numbers are not comparable. The company has also reported Q2FY19 numbers under previous Ind AS 18 and we have analyzed results based on the same.

Key Highlights

- Standalone net revenue for the quarter grew at slower rate of 4.8% yoy to Rs 2.5 bn due to lower VO income and decline in resort income. One of the reasons for lower growth of 5.2% yoy in VO income is due to increased contribution from low realization product 'Bliss'.

- EBITDA margins at 19.8% was below our estimates (of 22.2%) on account of decline in resort income due to floods in Kerala and high rain fall in Coorg which contributes large portion of room inventory for the company.

- The new membership addition grew by 11.9% yoy to 4145 with increased contribution from low tenure product (of 10 years) 'Bliss'. The company has added new inventory in Q2FY19, and is on track to add ~450 rooms in the next two years through greenfield expansion.

Valuation & outlook

- We have cut our revenue and earnings estimates based on previous Ind AS 18 factoring in increased contribution from low realization product and lower margins. However, the company would continue to generate strong cashflows in the long term.

- The stock is presently trading at FY19E/20E PE of 21.9/19.3x based on revised EPS of Rs. 10.4/11.8 respectively. We maintain Buy on the stock with revised SOTP based target price of Rs 315 (Vs Rs 390 earlier).

Shares of MAHINDRA HOLIDAYS & RESORTS INDIA LTD. was last trading in BSE at Rs.222 as compared to the previous close of Rs. 225.2. The total number of shares traded during the day was 4270 in over 109 trades.

The stock hit an intraday high of Rs. 225.5 and intraday low of 219.1. The net turnover during the day was Rs. 947133.

Source: Equity Bulls

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