BUY INDIAN HOTELS COMPANY, TAGET RS :180

-

Investor's Eye
[August 31, 2007] Please see the attachment for details

 

Indian Hotels Company  
Cluster: Apple Green
Recommendation: Buy
Price target: Rs180
Current market price: Rs128

Room rate hikes to boost earnings

Key points

  • Indian Hotels Company's (Indian Hotels) stock has underperformed after Q1FY2008 results and the stock has corrected by 9% in the last two months. We believe that the quarter's subdued performance was more due to the rupee appreciation than any significant change in the inherent characteristics of the industry.
  • To address the issue of the strong rupee, Indian Hotels has already announced that they would be shifting to a single tariff structure (rupee tariff) across all its properties in India from September this year. We have already mentioned in our Q4FY2007 update that the first half of FY2008 would get affected due to the rupee appreciation till the contracts are revised in September-October 2007.
  • As per the industry trends, the hotel players are going for a new tariff, which would be effective from September 2007. Our channel check reveals that apart from Bangalore and Hyderabad, the tariff hike for most of the cities is above 25%. The increase in the average room rate (ARR) for the four properties of Indian Hotels is 23% and in our projections we have assumed a conservative 15% growth in the ARR for FY2008. The ARR increase would significantly add to the earnings as even an assumed 20% growth in ARR boosts our earning estimates by 7% and 5% in FY2008 and FY2009 respectively.
  • We continue to maintain our Buy recommendation on Indian Hotels as it has multi location advantage, with which it can absorb the vagaries of the industry better than its peers. At the current market price of Rs128 the stock is quoting at a price earnings ratio (PER) of 17.7x FY2008E consolidated earnings per share (EPS) of Rs7.2 and 14.1x FY2009E consolidated EPS of Rs9.1. We maintain our Buy recommendation on the stock with price target of Rs180.

Popular posts from this blog

IOB capitalises on hike in stake by LIC

-
Indian Overseas Bank rose 1.53% to Rs 46.45 at 10:31 IST on BSE, after the biggest domestic instutional investors Life Insurance Corporation of India hiked its stake in the state-run bank. The bank made this announcement after trading hours on Wednesday, 25 March 2009. Meanwhile, the BSE Sensex was up 126.19 points, or 1.31%, to 9,794.09. On BSE, 31,003 shares were traded in the counter. The stock had an average daily volume of 1.93 lakh shares in the past one quarter. The stock hit a high of Rs 47 and a low of Rs 45.95 so far during the day. The stock hit a 52-week high of Rs 156.80 on 2 May 2008 and a 52-week low of Rs 37.55 on 9 March 2009. The mid-cap bank stock had underperformed the market over the past one month till 25 March 2009, falling 3.17% as compared to the Sensex's 8.60% rise. It had also underperformed the market in the past one quarter, declining 33.94% as compared to the Sensex's 1.04% rise. The bank's current equ The current price of ...
Read more

Lok Housing & Constructions builds on fund raising plans

-
Lok Housing & Constructions jumped 6.99% to Rs 107.90 at 11:20 IST on BSE ahead of a board meeting to consider fund raising options from both foreign and local market, including an institutional placement. Meanwhile, the BSE Sensex was down 50.50 points, or 0.30%, at 15203.73. On BSE, 1.86 lakh shares were traded in the counter. The scrip had an average daily volume of 4.74 lakh shares in the past one quarter. The stock hit a high of Rs 115 and a low of Rs 102 so far during the day. The stock had a 52-week high of Rs 390.50 on 1 January 2008 and a 52-week low of Rs 96.25 on 12 June 2008. The scrip had underperformed the market over the past one month till 12 June 2008, falling 26.55% compared to the Sensex's 10.18% decline. It had also underperformed the market in the past one quarter, falling 31.39% compared to Sensex's 3.24% fall. The small-cap housing projects developer has an equity capital of Rs 42.88 crore. Face value per share is Rs 10. The current...
Read more

Griffin Chemicals surges on re-listing

-
Griffin Chemicals was trading at Rs 29, up 2220% on re-listing after six years on Bombay Stock Exchange (BSE). The counter saw miniscule volume of 4769 shares. The stock opened at Rs 23, up 1740% against its last traded price of Rs 1.25 on 8 August 2002. The Griffin Chemicals stock was highly volatile today. It opened at Rs 23 and then rallied ahead to Rs 50 but soon eased to a low Rs 22. The surge in Griffin shares reminds of unprecedented rise in stock prices of KGN Industries on its re-listing day. KGN Industries, run by Ahmedabad-based Memon family, had re-listed at Rs 100 per share after nearly seven years in May 2008 this year. The stock had risen to a high of Rs 55,000.
Read more