Buy EIH; target of Rs 210: ICICI Directs

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ICICI Direct's research report on EIH

EIH’s performance witnessed a speed-breaker in the last quarter of FY19. Revenues remained flat YoY at Rs 430.9 crore (vs. I-direct estimate of Rs 475.8 crore) while they corrected 2.9% sequentially. EIH’s margins during the quarter were below our expectations though they expanded 142 bps YoY to 24.3% (vs. I-direct estimate of 30.2%) mainly due to no topline growth. EBITDA increased 6.1% YoY to Rs 104.8 crore. The quarter also saw Rs 84.75 crore being written-off, being receivables of flight catering business. This led to a sharp reduction in taxes by 81.4% YoY to Rs 5.9 crore while PAT declined 79.3% YoY to Rs 11.6 crore (below I-direct estimate of Rs 81.9 crore).

Outlook

Industry tailwinds coming into play, settling of dust in the airline industry and higher spending by domestic travellers would continue to keep the growth momentum going for the hospitality industry. Further healthy balance sheet and stable margins would improve return ratios, going ahead. Hence, we remain positive on EIH and maintain BUY rating on the company with a revised target price of Rs 210/share (at 25x FY21E EV/EBITDA).

For all recommendations report, click here

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