SHARETIPSINFO >>Research Reports >> INDIAN HOTEL (12-12-2008)

COMPANY OVERVEIW:
The Company was incorporated on 1st April 1902 by Jamsetji Tata and till 1965 owned and managed two hotel, they are Taj Mahal Hotel and the Green`s Hotel.
The company focuses and operates in three divisions namely luxury division, business hotel division and leisure division.
Indian Hotel has chalked out ambitious expansion plans. It is also readying up strategy to scale up its presence significantly in international arena.
Along with its associates and subsidiary, IHCL has targeted the commissioning of 9 thousand rooms by FY2011.This would take the total number of rooms under its management to 19 thousand from the current 10 thousand.
Indian hotel has outlined a capital expenditure of Rs 20 billion for over next four years.

NEW PROPERTY LAUNCHES:

RECENT DEVELOPMENT:
ORIENT EXPRESS HOTEL: IHCL acquired a 11% stake in Orient Express Hotel Ltd, a NYSE listed company , for $233 in sep 07.This was followed by an additional purchase of 0.6% stake for $14mn.OEHL owns/operates 49 properties across 25 countries and also operates 6 luxury trains services and 2 river canal cruises. It also has interest in real estate development.

INDUSTRY OUTLOOK:
Tourist inflow is seeing a growth of 10% YoY.
Improving infrastructure and marketing thrust. Government is committed for improvement of airports through public private participation.
Encouraging air travel.

KEY RISK:
Slow down in the global economy will see toll on tourism.
Recent terrorist attack on Taj hotel Mumbai and other places Mumbai  in will take some time to heal. Tourists were specially targeted.
This is the peak season, if things go bad it will hit the whole year balance sheet.
Company is on massive expansion plan; it may create over capacity in short term. But long term outlook is intact.

SHAREHOLDING PATTERN:

FINANCIAL:

 CHANGE IN TOTAL INCOME: TOTAL INCOME CHANGED AT CAGR OF 27.64%.

CHANGE IN OPERATING PROFIT: OPERATING PROFIT INCREASED AT CAGR OF 54.2%.

CHANGE IN NET PROFIT: NET PROFIT INCREASED AT CAGR OF 65.68%.

 RATIO:

EPS showed consistent increase.
NPM and OPM have shown YoY increase.
Interest coverage is stabilized at 7.

COMPARISON OF Q2FY2009 WITH Q2 FY2008:

Marginal fall in operating income seen as compared to last year second quarter due to slow down in the global economy in the second quarter of 2008-09.

MEDIAN PE RATIO:

VALUATION:
At current price of Rs 39-40 range, it is trading at 7.2X of trailing twelve month earning. At this price all the negative news are discounted. There cannot be anything worst than this for Indian Hotel company. Slow down in tourism and terrorist attack in Mumbai. Historically the company has  traded at PE multiple of 18.On conservative basis even if we take into account the bearish sentiment in the market the PE multiple should be around 14.This multiple translate the price at around Rs72.We expect the fair value of the companies share at Rs 72.

CONCLUSION:
Risk adverse investor could take position on this counter for at least 50% return in medium to long term. The downside in the stock is very limited.

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