Buy EIH; target of Rs 200: ICICI Direct

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ICICI Direct's research report on EIH

EIH reported a weak set of results mainly on account of the weak performance of the flight catering business. Revenues declined 13.5% YoY to Rs 290 crore (vs. I-direct estimates of ~Rs 350 crore). This drop in revenues was on the back of flight catering business losing ~50% business with the grounding of Jet Airways. Flight catering revenues came in at Rs 38 crore (down 49% YoY) while revenues from rooms and F&B segment were at Rs 252 crore vs. Rs 257 crore YoY. Combined (domestic and managed hotels) RevPAR increased 0.6% YoY to Rs 6310 and occupancy improved 86 bps to 63.47%. For domestic owned hotels, RevPAR declined 1.8% YoY to Rs 6506 while occupancy rates were down 50 bps YoY. EBITDA (adjusted) was at ~Rs 4 crore, down 72% YoY (vs. I-direct estimate of Rs 14.6 crore). This was led by flight catering business reporting an EBITDA loss of Rs 3.67 crore vs. profit of Rs 12.35 crore a year ago. Owing to reduction in operating profit during the quarter, the company reported a net loss of Rs 7.1 crore (vs. I-direct estimates of Rs 11.9 crore profit).

Outlook

We continue to maintain BUY on EIH valuing it at 25x FY21E EV/EBITDA arriving at a slightly reduced target price of Rs 200 per share.

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