TajGVK Result Updated

8/3/2019 TajGVK Result Updated

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Please refer to important disclosures at the end of this report 1

Y/E March (` cr) 3QFY2012 2QFY2012 % chg (qoq) 3QFY2011 % chg (yoy)

Net sales 66.0 58.4 13.0 70.1 (5.8)

Operating profit 18.6 18.8 (0.6) 27.7 (32.7)

OPM (%) 28.2 32.1 (384)bp 39.5 (1,129)bp

Net profit 6.1 4.3 41.2 12.9 (52.8)

Source: Company, Angel Research

TajGVK reported a 5.8% yoy decline in its top line to ` 66cr ( ` 70cr) for 3QFY2012.

The company’s OPM came in at 28.2%, as against 32.1% in 3QFY2011, down

1,129bp yoy. Occupancy rates (OR) especially for Hyderabad remained weak

during the quarter. Chennai hotel showed strong improvement over 3QFY2011,

with its overall OR coming in at 71% and average room rate (ARR) at ` 5,300. We

are positive on the outlook of the company, given that the key markets of the

company, Hyderabad and Chennai, are showing signs of stabilizing. We maintain

our Buy recommendation on the stock.

OR declines in Hyderabad properties on a yoy basis: OR and ARR fluctuated

across Hyderabad properties due to the ongoing issues over Telangana.

Taj Krishna reported a 16.2% yoy decline in OR to 57%; but, at the same time, its

ARR improved by 16.4% yoy to ` 8,500 in 3QFY2012 from ` 7,300 in 3QFY2011.

Taj Deccan and Banjara also witnessed a decline in OR to 65% and 60%,

respectively, from 67% each in 3QFY2011. ARR also declined for these properties

on a yoy basis to ` 5,400 and ` 5,152, respectively. Taj Chandigarh’s OR declinedto 63% in 3QFY2012 from 72% in 3QFY2011; and its ARR declined to ` 6,841 in

3QFY2012 from ` 8,000 in 3QFY2011. Taj Chennai was the only hotel to witness

an increase in OR to 71% from 65%; and its ARR increased to ` 5,300 in

3QFY2012 from ` 5,200 in 3QFY2011. The company commenced operations at

its new Begumpet property during the quarter.

Outlook and valuation: We maintain our positive outlook on the entire hotel

industry, as increasing foreign tourist arrivals and economic growth will lead to a

further increase in demand for hotel rooms. TajGVK is expected to benefit from the

addition of its 189-room property in Begumpet, which has taken its owned rooms to

1,086 from 897 currently. The stock is currently trading at attractive valuations of

9.0x itsFY2013E EPS. We have valued the stock at 12x its FY2013E earnings. We

maintain our Buy view on the stock with a revised target price of `100.

Key financials

Y/E March (` cr) FY2010 FY2011E FY2012E FY2013E

Net Sales 228.3 259.3 262.5 322.1

% chg (3.9) 13.6 1.3 22.7

Net Profit 36.3 43.3 28.8 52.1

% chg (31.3) 19.5 (33.6) 81.3

EBITDA Margin (%) 37.6 37.1 30.7 36.3

EPS (`) 5.8 6.9 4.6 8.3

P/E (x) 13.0 10.9 16.4 9.0

P/BV (x) 1.6 1.5 1.4 1.2

RoE (%) 12.9 14.1 8.7 14.5

RoCE (%) 15.4 16.5 11.3 17.1

EV / Sales (x) 2.6 2.3 2.4 1.8

EV/Room ( ` cr) 0.7 0.7 0.6 0.5

EV/EBITDA (x) 6.9 6.3 7.7 5.0


BUYCMP ` 75

Target Price ` 100

Investment Period 12 Months

Stock Info

Sector

Bloomberg Code

Shareholding Pattern (%)

Promoters 75.0

MF / Banks / Indian Fls 6.9

FII / NRIs / OCBs 3.0

Indian Public / Others 15.1

Abs.(%) 3m 1yr 3yr

Sensex (1.0) (4.0) 90.8

TajGVK (21.0) (31.3) 67.4

TAJG@IN

Face Value ( ` )

BSE Sensex

Nifty

Reuters Code

2

17,301

5,236

TAJG.BO

Hotels

Avg. Daily Volume

Market Cap ( ` cr)

Beta

52 Week High / Low

471

0.7

121 / 63

18,845

Sharan Lillaney

+91 22 3935 7800 Ext: 6811

[email protected]

TajGVK

Performance Highlights

3QFY2012 Result Update | Hotels

February 1, 2012



TajGVK | 3QFY2012 Result Update

February 1, 2012 2

Exhibit 1: 3QFY2012 performance highlights

Y/E March (` cr) 3QFY2012 2QFY2012 % chg (qoq) 3QFY2011 % chg (yoy)

Net Sales 66.0 58.4 13.0 70.1 (5.8)

Consumption of RM 7.1 5.7 23.7 6.9 2.5(% of Sales) 10.7 9.8 9.9

Staff Costs 14.9 12.4 20.7 11.7 27.4

(% of Sales) 22.6 21.2 16.7

Power, Fuel and Oil 5.7 5.6 2.1 5.3 8.6

(% of Sales) 8.7 9.6 7.5

Other Expenses 19.6 16.0 22.8 18.5 6.1

(% of Sales) 29.7 27.3 26.4

Total Expenditure 47.4 39.7 19.3 42.4 11.7

Operating Profit 18.6 18.8 (0.6) 27.7 (32.7)

OPM 28.2 32.1 (385)bp 39.5 (1,129)bp

Interest 4.0 3.2 26.5 3.0 33.9

Depreciation 5.6 5.0 12.9 5.3 6.8

Other Income 0.3 0.8 0.1

PBT 9.3 11.3 (18.1) 19.6 (52.5)

(% of Sales) 14.1 19.4 27.9

Provision for Taxation 3.2 7.0 (54.6) 6.6 (52.0)

(% of PBT) 34.4 62.0 34.0 40.5

Reported PAT 6.1 4.3 41.2 12.9 (52.8)

PATM 9.2 7.4 183bp 18.4 (919)bp

Equity shares (cr) 6.3 6.3 6.3

EPS ( ` ) 1.0 0.7 41.2 2.1 (52.8)

Adjusted PAT 6.1 4.3 41.2 12.9 (52.8)


Net sales down by 5.8% yoy

During 3QFY2012, the company posted a yoy decline of 5.8% in its net sales,

largely due to low OR in Hyderabad because of the political unrest in the city as

well large inventory build-up during the year. Going ahead, we expect sales

growth to pick up from the current levels going ahead.




February 1, 2012 3

Exhibit 2: Sales trend


OPM declined by 1,129bp yoy to 28.2%

TajGVK reported OPM of 28.2% for 3QFY2012, which witnessed a decline of

1,129bp yoy, largely due to the launch of its new property at Begumpet, where all

pre-operating expenses were accounted for in the P&L. Operating profit came in at

` 19cr, down 32.7% yoy. We expect margins to come back to historical levels as

the Begumpet property starts contributing to the revenue.

Exhibit 3: OPM trend


PAT down by 52.8% yoy to ` 6cr

PAT declined by 52.8% yoy to ` 6cr during 3QFY2012, largely due to margin

compression during the quarter. Going ahead, we expect the company to post

higher PAT growth on the back of sales contribution from its new Begumpet

property and OPM expansion.

63

6160

7069

59 58

66

(10)

(5)

0

5

10

1520

25

30

52

54

56

58

60

62

6466

68

70

72

4 Q F Y 1 0

1 Q F Y 1 1

2 Q F Y 1 1

3 Q F Y 1 1

4 Q F Y 1 1

1 Q F Y 1 2

2 Q F Y 1 2

3 Q F Y 1 2

( % )

( `

c r )

Sales (LHS) yoy Growth (RHS)

26

22

19

28

18

2019 19

0

5

10

15

20

25

30

35

40

45

0

5

10

15

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4 Q F Y 1 0

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2 Q F Y 1 1

3 Q F Y 1 1

4 Q F Y 1 1

1 Q F Y 1 2

2 Q F Y 1 2

3 Q F Y 1 2

( % )

( `

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EBITDA (LHS) OPM (RHS)




February 1, 2012 4

Exhibit 4: PAT growth trend


12

10

7

13

6

12

4

6

0

2

4

6

8

10

12

14

4 Q F Y 1 0

1 Q F Y 1 1

2 Q F Y 1 1

3 Q F Y 1 1

4 Q F Y 1 1

1 Q F Y 1 2

2 Q F Y 1 2

3 Q F Y 1 2

( `

c r )




February 1, 2012 5

Investment arguments

Strengthening its foothold in the Hyderabad market: TajGVK is a market leader in

the Hyderabad market, where it has a share of nearly 30% in premium-segment

rooms. The company has commenced operations at its Begumpet property, which

would strengthen its foothold further. The company also plans to add service

apartments and retail space in its existing Taj Krishna property. We believe TajGVK

would emerge as a prime beneficiary in Hyderabad after the expansion.

Diversification strategy to de-risk the business model: In FY2008, 78% of TajGVK's

room inventory was located in Hyderabad. To diversify its presence, the company

came up with Taj Mount Road in Chennai in December 2008. With this, the

company has toned down Hyderabad’s concentration to 59% of the total room

inventory in FY2009. The company is also planning to enter Bengaluru and is

exploring the possibility of entering the mid-market segment through tie-ups with

IHCL's Ginger. We believe this strategy will prove beneficial in the long run, as it

would reduce over-exposure in the Hyderabad market.

Asset-light strategy to keep the balance sheet healthy: TajGVK’s Begumpet

property has been commissioned using an asset-light strategy. This resulted in a

lower capital outlay as compared to a greenfield expansion. Accordingly, we

expect the company's debt-equity ratio to be at a comfortable level of 0.3x in

FY2013E, which provides TajGVK with adequate room to plan further expansions,

without hampering its balance sheet quality.

Outlook and valuation

We maintain our positive outlook on the entire hotel industry, as increasing foreign

tourist arrivals and economic growth will lead to a further increase in demand for

hotel rooms. TajGVK is expected to benefit from the addition of its 189-room

property in Begumpet, which has taken its owned rooms to 1,086 from 897

currently. The stock is currently trading at attractive valuations of 9.0x its FY2013E

EPS. We have valued the stock at 12x its FY2013E earnings. We maintain our Buy

view on the stock with a revised target price of `100.

Exhibit 5: One-year forward P/E band

Source: Company, Bloomberg, Angel Research

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12

S h a r e P

r i c e (

` )

Price 9x 12x 15x 18x 21x




February 1, 2012 6

Profit and loss statement

Y/E March (` cr) FY09 FY10 FY11 FY12E FY13E

Net Sales 237 228 259 263 322

Other operating income - - - - -Total operating income 237 228 259 263 322

% chg (7.8) (3.9) 13.6 1.3 22.7

Total Expenditure 137 143 163 182 205

Net Raw Materials 20 21 25 26 32

Other Mfg costs 29 38 40 46 47

Personnel 37 35 47 60 67

Other 51 48 51 50 59

EBITDA 101 86 96 81 117

% chg (16.7) (15.0) 12.3 (16.3) 45.1

(% of Net Sales) 42.4 37.6 37.1 30.7 36.3

Depreciation& Amortisation 14 20 21 24 29

EBIT 87 66 76 56 88

% chg (20.4) (24.1) 14.5 (25.6) 56.6

(% of Net Sales) 36.7 29.0 29.2 21.4 27.3

Interest & other Charges 7 12 11 14 10

Other Income 1 1 1 1 1

(% of PBT) 1 2 2 3 2

Recurring PBT 82 55 66 44 79

% chg (24.6) (32.8) 19.7 (33.7) 81.3

Extraordinary Income/(Exp.) (1) (0) - - -

PBT (reported) 81 55 66 44 79

Tax 29 19 22 15 27

(% of PBT) 35.6 34.0 34.1 34.0 34.0

PAT (reported) 52 36 43 29 52

ADJ. PAT 53 36 43 29 52

% chg (25.1) (31.3) 19.5 (33.6) 81.3

(% of Net Sales) 22.2 15.9 16.7 11.0 16.2

Basic EPS (`) 8.4 5.8 6.9 4.6 8.3

Fully Diluted EPS (̀ ) 8.4 5.8 6.9 4.6 8.3

% chg (25.1) (31.3) 19.5 (33.6) 81.3




February 1, 2012 7

Balance sheet

Y/E March (` cr) FY09 FY10 FY11E FY12E FY13E

SOURCES OF FUNDS

Equity Share Capital 13 13 13 13 13

Preference Capital - - - - -

Reserves& Surplus 258 280 309 326 367

Shareholders’ Funds 271 293 321 339 380

Total Loans 139 125 141 156 116

Deferred Tax Liability 12 16 19 19 19

Total Liabilities 422 434 482 514 515

APPLICATION OF FUNDS

Gross Block 463 483 492 667 707

Less: Acc. Depreciation 89 107 128 152 181

Net Block 374 375 364 514 525

Capital Work-in-Progress 69 84 124 20 20

Goodwill - - - - -

Investments - - - - -

Current Assets 33 36 46 45 48

Cash 2 3 5 5 5

Loans & Advances 20 22 26 24 24

Other 11 11 14 15 19

Current liabilities 55 63 54 66 79

Net Current Assets (23) (27) (8) (21) (32)

Mis. Exp. not written off 2 2 1 1 1Total Assets 422 434 482 514 515




February 1, 2012 8

Cash flow statement

Y/E March (` cr) FY09 FY10 FY11E FY12E FY13E

Profit before tax 82 55 66 44 79

Depreciation 14 20 21 24 29

Change in Working Capital (13) 7 (12) 12 10

Less: Other income

Direct taxes paid 29 19 22 15 27

Cash Flow from Operations 53 63 52 65 91

(Inc)./ Dec in Fixed Assets (126) (36) (49) (70) (40)

(Inc)./ Dec in Investments - (0) - - -

(Inc)/ Dec in loans and advances 10 (2) (5) 2 -

Other income

Cash Flow from Investing (116) (38) (54) (68) (40)

Issue of Equity - - - - -Inc./(Dec.) in loans 65 (14) 16 15 (40)

Dividend Paid (Incl. Tax) (13) (13) (6) (10) (10)

Others 1 2 (5) (1) (1)

Cash Flow from Financing 53 (24) 5 4 (51)

Inc./(Dec.) in Cash (9) 1 2 0 (0)

Opening Cash balances 11 2 3 5 5

Closing Cash balances 2 3 5 5 5




February 1, 2012 9

Key ratios

Y/E March FY09 FY10 FY11E FY12E FY13E

Valuation Ratio (x)

P/E (on FDEPS) 8.9 13.0 10.9 16.4 9.0P/CEPS 7.1 8.4 7.4 8.9 5.8

P/BV 1.7 1.6 1.5 1.4 1.2

Dividend yield (%) 2.7 2.7 1.3 2.1 2.1

EV/Room (Rs cr.) 0.7 0.7 0.7 0.6 0.5

EV/Sales 2.6 2.6 2.3 2.4 1.8

EV/EBITDA 6.0 6.9 6.3 7.7 5.0

EV / Total Assets 1.4 1.4 1.3 1.2 1.1

Per Share Data (`)EPS (Basic) 8.4 5.8 6.9 4.6 8.3

EPS (fully diluted) 8.4 5.8 6.9 4.6 8.3

Cash EPS 10.6 8.9 10.2 8.5 12.9

DPS 2.0 2.0 1.0 1.6 1.6

Book Value 43.2 46.7 51.3 54.1 60.6

Dupont Analysis

EBIT margin 36.7 29.0 29.2 21.4 27.3

Tax retention ratio 64.4 66.0 65.9 66.0 66.0

Asset turnover (x) 0.6 0.5 0.5 0.5 0.

ROIC (Post-tax) 13.3 10.0 10.4 7.2 11.3

Cost of Debt (Post Tax) 4.0 6.1 5.6 6.2 5.1

Leverage (x) 0.4 0.5 0.4 0.4 0.4

Operating ROE 17.0 11.9 12.4 7.6 13.5

Returns (%)

ROCE (Pre-tax) 23.6 15.4 16.5 11.3 17.1

Angel ROIC (Pre-tax) 24.8 19.1 21.5 11.5 18.0

ROE 20.9 12.9 14.1 8.7 14.5

Turnover ratios (x)

Asset Turnover (Gross Block) 0.6 0.5 0.5 0.5 0.5

Inventory / Sales (days) 6 7 6 7 6

Receivables (days) 9 11 12 14 13

Payables (days) 164 152 131 120 130

Working capital cycle (ex-cash) (days) (41) (44) (30) (28) (36)Solvency ratios (x)

Net debt to equity 0.5 0.4 0.4 0.4 0.3

Net debt to EBITDA 1.4 1.4 1.4 1.9 1.0

Interest Coverage (EBIT / Interest) 13.1 5.4 6.7 4.0 8.4




February 1, 2012 10

Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com

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Disclosure of Interest Statement TajGVK

1. Analyst ownership of the stock No

2. Angel and its Group companies ownership of the stock No

3. Angel and its Group companies' Directors ownership of the stock No

4. Broking relationship with company covered No

Ratings (Returns): Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)Reduce (-5% to 15%) Sell (< -15%)

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TajGVK Result Updated