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Published on 7/12/2019 12:26:38 PM | Source: Motilal Oswal Ltd

Hospitality Sector - IHIN outshines the pack By Motilal oswal

Posted in Broking Firm Views - Sector Report| #Motilal Oswal #Hospitals and Medical Services #Sector Report

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IHIN outshines the pack

Lower corporate resistance to tariff hikes post GST rate cut, say players

We pored over 2QFY20 results and management commentary of key hospitality players such as Indian Hotels (IHIN), Lemon Tree Hotels (LEMONTRE), Chalet Hotels (CHALET) and EIH. Key insights highlighted below:

 

Aggregate revenue of players up 5%; IHIN’s EBITDA performance shines

* 2QFY20 and 1HFY20 aggregate revenues for the hospitality set – IHIN, CHALET, and LEMONTRE (excluding EIH as its flight catering biz was impacted due to the shutdown of Jet Airways) – grew 5% YoY, mainly due to the economic slowdown. IHIN and LEMONTRE led the growth, while CHALET remained flat. Aggregate EBITDA for the hospitality set grew 15%/13% for 2QFY20/1HFY20 driven by IHIN.

* IHIN’s consolidated revenue grew 4% YoY to INR10.1b, while adj. EBITDA (adj. for Ind-AS 116) increased 16% YoY to INR1.15b due to cost rationalization and operating leverage. Standalone revenue/adj. EBITDA grew 5%/12% YoY to INR6b/INR994m. Subsidiary revenue/adj. EBITDA grew 4%/58% YoY to INR4.1b/INR159m and was driven by the US (cash losses reduced by INR40m) and St James’ performance.

* LEMONTRE witnessed robust 19% YoY growth to INR1.5b, mainly due to inventory addition of 700 rooms (absent in the base quarter). Despite this, adj. EBITDA grew only 12% YoY to INR404m due to pending stabilization of recently commenced hotels and additional cost of INR22m.

* CHALET’s revenue remained flat YoY at INR2.4b; however, after adjusting EBITDA for exchange loss of INR389m in 2QFY19, EBITDA grew 16% YoY to INR816m. Additionally, CHALET’s hospitality segment EBITDA after adjusting for exchange loss (of INR367m in 2QFY19) declined 3% YoY to INR749m. Thus, commercial segment aided overall EBITDA (up 5.6x YoY) to touch INR222m as the ‘Sahar Office Tower’ got occupied.

* EIH’s overall revenue declined 14% YoY to INR3.4b, primarily due to the loss of the flight catering business from Jet Airways. EBITDA declined 58% YoY to INR197m.

 

RevPAR across players up marginally

* Hotels across India (industry) witnessed 3.1% YoY growth in RevPAR to INR3,254 during the quarter.

* IHIN’s RevPAR in 2QFY20 grew 3.9% YoY to INR4,833, thus, outperforming in the key markets of Mumbai (+6%), New Delhi (+8%), Chennai (+10%), Hyderabad (+9%) and Bengaluru (+5%). IHIN’s domestic hotel network’s room/F&B revenue grew 9%/4% YoY in the quarter. Note that IHIN’s (standalone) occupancy improved by 430bp to 68.2% in 2QFY20; however, ARRs declined 4.5% YoY and contained RevPAR growth to 1.7%. 

 

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