CMP 300.00

Target Price 330.00

ISIN: INE319B01014

DECEMBER 18th

2013

THE BYKE HOSPITALITY LTD

Result Update: Q2 FY14

BUYBUYBUYBUY

Index Details

Stock Data

Sector Tourism & Hospitality

BSE Code 531373

Face Value 10.00

52wk. High / Low (Rs.) 315.00/189.95

Volume (2wk. Avg.) 150000

Market Cap (Rs. in mn.) 6014.70

Annual Estimated Results (A*: Actual / E*: Estimated)

YEARS FY13A FY14E FY15E

Net Sales 1009.25 1312.03 1495.71

EBITDA 172.61 245.13 286.74

Net Profit 77.57 133.73 155.29

EPS 3.87 6.67 7.75

P/E 77.54 44.98 38.73

Shareholding Pattern (%)

1 Year Comparative Graph

THE BYKE HOSPITALITY LTD S&P BSE SENSEX

SYNOPSIS

The Byke Hospitality Ltd engages in the operation

of hotels and restaurants in India. It also provides

flight/bus bookings, car rental, sightseeing, and

cruise services.

The company’s net sales registered a 101.50%

increase and stood at a record Rs. 322.68 million

from Rs. 160.14 million over the corresponding

quarter last year.

The company’s net profit registered a 337.39%

increase and stood at a record Rs. 33.46 million

from Rs. 7.65 million over the corresponding

quarter last year.

Profit before interest, depreciation and tax is Rs.

61.26 millions as against Rs.24.24 millions in Q2

FY13, an increase of 153%.

EPS of the company stood at Rs.1.67 a share

during the quarter, registering 337.39% increase

over previous year period.

Indian Hospitality industry contributes around

2.2 percent of India’s GDP.

By 2015, a total investment of Rs. 545.2 billion is

expected that will add over 20 new international

brands in the hospitality sector.

Net Sales and PAT of the company are expected to

grow at a CAGR of 45% and 86% over 2012 to

2015E respectively.

PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND

Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)

The Byke Hospitality Ltd 300.00 6014.70 3.87 77.54 8.30 10.00

Mahindra Holidays & Resorts India Ltd 241.00 21485.00 12.48 19.39 3.36 40.00

EIH Ltd 54.90 31150.50 1.35 40.37 1.19 45.00

Asian Hotels (East) Ltd 128.90 1474.70 26.37 4.89 0.18 45.00

Recommendation & Analysis - ‘BUY’

The Byke Hospitality Ltd reported unaudited earnings results for the second quarter and six months ended

September 30, 2013. For the quarter, the company reported net sales/income from operations was INR 322.68

million against INR 160.14 million a year ago. Profit from operations before other income, finance costs and

exceptional items was INR 47.17 million against INR 15.07 million a year ago. Profit from ordinary activities

before tax was INR 42.09 million compared to INR 9.65 million for the same period a year ago. Net profit was

INR 33.46 million or INR 1.67 diluted earnings per share against INR 7.65 million or INR 0.38 diluted earnings

per share a year ago. For the half year, the company reported net sales/income from operations was INR

614.63 million against INR 345.62 million a year ago. Profit from operations before other income, finance costs

and exceptional items was INR 89.74 million against INR 30.74 million a year ago. Profit from ordinary

activities before tax was INR 79.61 million compared to INR 19.94 million for the same period a year ago. Net

profit was INR 63.29 million or INR 3.16 diluted earnings per share against INR 15.83 million or INR 0.79

diluted earnings per share a year ago.

Over FY2012-15E, we expect the company to post a CAGR of 45% and 86% in its top-line and bottom-line

respectively. Hence, we recommend ‘BUY’ for ‘The Byke Hospitality Ltd’ with a target price of Rs. 330.00.

QUARTERLY HIGHLIGHTS (STANDALONE)

Results updates- Q2 FY14,

Months Sep-13 Sep-12 % Change

Net Sales 322.68 160.14 101.50

PAT 33.46 7.65 337.39

EPS 1.67 0.38 337.39

EBITDA 61.26 24.24 152.72

The company’s net profit jumps to Rs.33.46 million against Rs.7.65 million in the corresponding quarter

ending of previous year, an increase of 337.39%. Revenue for the quarter rose by 101.50% to Rs.322.68

million from Rs.160.14 million, when compared with the prior year period. Reported earnings per share of the

company stood at Rs.1.67 a share during the quarter, registering 337.39% increase over previous year period.

Profit before interest, depreciation and tax is Rs. 61.26 millions as against Rs.24.24 millions in the

corresponding period of the previous year.

Break up of Expenditure

Break up of Expenditure

Rs. Million

Q2 FY14 Q2 FY13

Operating Cost 222.30 120.79

Employee Benefit Expenses 6.74 6.86

Depreciation & Amortization Expense

13.83 8.76

Other Expenditure 32.65 8.65

Total Expenditure 275.51 145.07

COMPANY PROFILE

The Byke Hospitality Limited, formerly Suave Hotels Limited operates hotels and restaurants in Goa, India. The

Company also provides travels and tourism industry services. The company was incorporated in the year 1990.

As of March 31, 2010, the Company operates seven hotels with a capacity of 465 rooms located in Matheran,

Maharashtra; Goa; Manali, Himachal Pradesh; and Shekhawati, Rajasthan under the The Byke brand.

Hotels and Resorts

• The Byke Heritage Matheran

The Byke is Matheran's first dwelling place. Built in 1854 by the discoverer of Matheran, Hugh Malet, then

Collector of Thane , it is a heritage building that still stands majestically in all its pristine glory, personifying a

heritage unparalleled, surrounded by the inheritance of 7 sprawling acres. In this wooded estate the first

luxury hotel of Matheran, The Byke- A Hotel Retreat, has been blended with nature.

• The Byke Hidden Paradise

The Byke Hospitality Ltd. - A fast growing chain of best pure veg resorts, with Class of hotels in Matheran,

Manali and South Goa, now, proudly announces the opening of the one of finest new boutique resort in the

exotic ASHWEM BEACH - ‘The Byke Hidden Paradise’.

Located near the peaceful yet exotic Ashwem beach, The Byke Hidden Paradise is one of the finest boutique

resorts for a pleasant stay complete with all the facilities and a beautiful swimming pool.

• The Byke Old Anchor, Goa

The first ever Resort in South Goa Old Anchor has cast its spell on one and all. Here, from dawn to dusk, you

can see the earth & the sea resting in one another's arms & dreaming of waves, tides, clouds, sands & lush

green palms.

Goa echoes with the magic of its natural panoramic beauty, beaches temples and churches with their distinct

style of architecture, colorful festival, a rich cultural atmosphere and above all friendly and warm people.

Silver sands, cool sea breeze, the parties at the shacks, water sports, swimming with the Dolphins or a lazy

cruise down the river, whatever makes your holiday. Goa has it all. And there’s no better place to drop anchor

in Goa than at The Byke Old Anchor Resort. The resort has 240 deluxe bedrooms.

• The Byke Neelkanth, Manali

Neelkanth Cottage is now REBORN as "The Byke Neelkanth". The hotel, is located in village Prini amidst lush

green apple orchards, open view valley, an awesome view of Manali Snow Peaks. The rolling verdant valleys,

the forested hill sides, serve an unending charm for refreshing a holiday in this beautiful land.

• The Byke Redwood, Matheran

FINANCIAL HIGHLIGHT (STANDALONE)

Balance sheet as at March31, 2012 to 2015E

(A*- Actual, E* -Estimations & Rs. In Millions)

FY12A FY13A FY14E FY15E

SOURCES OF FUNDS (Rs.in.mn)

Shareholder's Funds

Share Capital 200.49 200.49 200.49 200.49

Reserves and Surplus 469.97 524.08 657.81 813.09

1. Sub Total - Net worth 670.46 724.57 858.30 1013.58

Non Current Liabilities

Long term Borrowings 96.26 83.39 75.05 69.05

Deferred Tax Liabilities 28.12 38.64 48.30 55.06

Other Long term Liabilities 0.08 0.08 0.15 0.20

Long Term Provisions 0.05 0.16 0.19 0.30

2. Sub Total - Non Current Liabilities 124.51 122.27 123.69 124.61

Current Liabilities

Short Term Borrowings 62.08 92.19 83.89 78.86

Trade Payables 30.13 91.16 74.57 67.11

Other Current Liabilities 21.44 44.74 37.58 40.59

Short Term Provisions 30.06 61.49 50.42 55.97

3. Sub Total - Current Liabilities 143.71 289.58 246.47 242.53

Total Liabilities (1+2+3) 938.68 1136.42 1228.46 1380.72

APPLICATION OF FUNDS

Non-Current Assets

Fixed Assets

Tangible assets 467.08 726.79 763.13 839.44

Intangible assets 0.00 0.00 0.00 0.00

Capital Work in Progress 197.02 31.03 32.89 35.19

Intangible assets under development 0.00 0.00 0.00 0.00

a) Sub Total - Fixed Assets 664.10 757.82 796.02 874.64

b) Long Term Loans and Advances 39.71 40.72 52.94 62.46

c) Other Non-current Assets 4.00 14.11 17.50 21.00

1. Sub Total – Non Current Assets 707.81 812.65 866.45 958.10

Current Assets

Inventories 60.22 59.90 63.49 69.84

Trade receivables 29.29 119.32 118.37 132.57

Cash and Bank Balances 19.96 10.48 10.79 12.09

Short-terms loans & advances 121.17 133.13 167.74 206.21

Other current assets 0.23 0.94 1.60 1.90

2. Sub Total - Current Assets 230.87 323.77 362.00 422.62

Total Assets (1+2) 938.68 1136.42 1228.46 1380.72

Annual Profit & Loss Statement for the period of 2012to 2015E

Value(Rs.in.mn) FY12A FY13A FY14E FY15E

Description 12m 12m 12m 12m

Net Sales 490.60 1009.25 1312.03 1495.71

Other Income 0.47 5.02 2.41 2.55

Total Income 491.07 1014.27 1314.43 1498.26

Expenditure -439.21 -841.66 -1069.30 -1211.52

Operating Profit 51.86 172.61 245.13 286.74

Interest -5.18 -22.97 -24.12 -25.57

Gross profit 46.68 149.64 221.02 261.17

Depreciation -11.19 -34.04 -51.74 -59.50

Profit Before Tax 35.49 115.60 169.27 201.67

Tax -11.52 -38.03 -35.55 -46.38

Net Profit 23.97 77.57 133.73 155.29

Equity capital 200.49 200.49 200.49 200.49

Reserves 469.97 524.08 657.81 813.09

Face value 10.00 10.00 10.00 10.00

EPS 1.20 3.87 6.67 7.75

Quarterly Profit & Loss Statement for the period of 31st

Mar, 2013 to 31st Dec, 2013E

Value(Rs.in.mn) 31-Mar-13 30-Jun-13 30-Sep-13 31-Dec-13E

Description 3m 3m 3m 3m

Net sales 334.01 291.95 322.68 393.67

Other income 4.25 0.33 0.26 0.36

Total Income 338.26 292.28 322.94 394.03

Expenditure -273.66 -236.97 -261.68 -321.23

Operating profit 64.60 55.31 61.26 72.79

Interest -5.57 -5.38 -5.34 -5.66

Gross profit 59.03 49.93 55.92 67.13

Depreciation -7.83 -12.41 -13.83 -14.66

Profit Before Tax 51.20 37.52 42.09 52.47

Tax 0.00 -7.69 -8.63 -11.02

Net Profit 51.20 29.83 33.46 41.45

Equity capital 200.49 200.49 200.49 200.49

Face value 10.00 10.00 10.00 10.00

EPS 2.55 1.49 1.67 2.07

Ratio Analysis

Particulars FY12A FY13A FY14E FY15E

EPS (Rs.) 1.20 3.87 6.67 7.75

EBITDA Margin (%) 10.57% 17.10% 18.68% 19.17%

PBT Margin (%) 7.23% 11.45% 12.90% 13.48%

PAT Margin (%) 4.89% 7.69% 10.19% 10.38%

P/E Ratio (x) 250.93 77.54 44.98 38.73

ROE (%) 3.58% 10.71% 15.58% 15.32%

ROCE (%) 7.61% 22.96% 29.18% 29.81%

Debt Equity Ratio 0.24 0.24 0.19 0.15

EV/EBITDA (x) 118.65 35.80 25.14 21.45

Book Value (Rs.) 33.44 36.14 42.81 50.56

P/BV 8.97 8.30 7.01 5.93

Charts

OUTLOOK AND CONCLUSION

� At the current market price of Rs.300.00, the stock P/E ratio is at 44.98 x FY14E and 38.73 x FY15E

respectively.

� Earning per share (EPS) of the company for the earnings for FY14E and FY15E is seen at Rs.6.67 and Rs.7.75

respectively.

� Net Sales and PAT of the company are expected to grow at a CAGR of 45% and 86% over 2012 to 2015E

respectively.

� On the basis of EV/EBITDA, the stock trades at 25.14 x for FY14E and 21.45 x for FY15E.

� Price to Book Value of the stock is expected to be at 7.01 x and 5.93 x respectively for FY14E and FY15E.

� We recommend ‘BUY’ in this particular scrip with a target price of Rs. 330.00 for Medium to Long term

investment.

INDUSTRY OVERVIEW

The Indian tourism and hospitality industry has emerged as one of the key industries driving growth of the

services sector in India. Tourism in India has registered significant growth in the recent years and the country

has tremendous potential to become a major global tourist destination.

Indian tourism industry is thriving due to an increase in foreign tourist arrivals and greater number of Indians

travelling to domestic destinations than before. In the past few years the real growth has come from within the

domestic sector as around 30 million Indians travel within the country in a year. Strong growth in per capita

income, rising young population coupled with changing lifestyles are leading to greater expenditure on leisure

services.

Hotels are an important component of the tourism product. They contribute in the overall tourism experience

through the standards of facilities and services offered by them. The fortunes of the hospitality industry have

always been linked to the prospects of the tourism industry and tourism is the foremost demand driver of the

industry.

Travel & tourism’s contribution to capital investment is projected to grow at 6.5 per cent per annum during

2013-2023, above the global average of five per cent. The tourism policy of Government of India aims at speedy

implementation of tourism projects, development of integrated tourism circuits, special capacity building in the

hospitality sector and new marketing strategies

Market Size

The total market size of Indian tourism and hospitality sector stood at US$ 117.7 billion and is expected to touch

US$ 418.9 billion by 2022.

The foreign direct investment (FDI) inflows in hotel and tourism sector during April 2000 to July 2013 stood at

US$ 6,754.49 million, according to Department of Industrial Policy and Promotion (DIPP).

Foreign tourist arrivals (FTA) during the Month of August 2013 stood at 4.74 lakh as compared to FTAs of 4.46

lakh during August 2012, registering a growth of 6.4 per cent.

Foreign exchange earnings (FEE) during the month of August 2013 were US$1.294 billion as compared to FEEs

of US$1.306 billion during August 2012 and US$ 1.264 billion in August 2011.

The number of tourists availing of the tourist Visa on Arrival (VOA) Scheme during January to August, 2013 have

recorded a growth of 29.4 percent. During the period, a total number of 12,176 VOAs have been issued as

compared to 9,412 VOAs during the corresponding period of 2012.

Major developments and Investments

India is expected to receive nearly half a million medical tourists by 2015, implying an annual growth of 30 per

cent. The country has received 43.06 lakh foreign tourists during the period January-August 2013. India is

perceived as one of the fastest growing medical tourism destination. The number of medical tourists coming to

India has registered a growth of 40 per cent in the past six months. The inflow of medical tourists is expected to

cross 45 lakh by 2015 from the current level of 25 lakh.

• The Taj Group has launched The Gateway Hotel IT Expressway Chennai, its first hotel in the city under the

Gateway Hotels & Resorts brand.

• Marriott International has launched its business hotel brand Courtyard by Marriott at the industrial and auto

hub of Chakan near Pune in Maharashtra.

• ITC Hotels has tied up with Bahrain-based India-born billionaire Mr Ravi Pillai to manage five of its hotels

under the Welcom Hotel and Fortune brands in India and Dubai.

• Ecole hoteliere de Lausanne has opened a 67,000 square feet campus in India to tap into the growing demand

for skilled hospitality professionals in the country. Located in the newly developed Lavasa Township near

Pune, Ecole Hoteliere Lavasa will offer a four-year programme.

Government Initiatives

The Government has allowed 100 per cent FDI under the automatic route in the hotel and tourism related

industry, according to the Consolidated FDI Policy, released by DIPP, Ministry of Commerce and Industry,

Government of India.

The Ministry of Tourism, Government of India, has signed bilateral agreements/ memoranda of understanding

(MoU) with 47 countries, a tripartite agreement between India, Brazil and South Africa and a multilateral

agreement between India and Member States of Association of South East Asian Nations (ASEAN) for

cooperation in the tourism sector.

The Ministry of Tourism as part of its promotional activities releases campaigns in the international and

domestic markets under the Incredible India brand-line, to promote various tourism destinations and products

of India. The budget allocated for the Domestic Promotion & Publicity and Overseas Promotion & Publicity

including Marketing Development stood at Rs 110 crore (US$ 17.73 million) and Rs 350 crore (US$ 56.41

million) for the FY 2013-14.

The ministry has set up a Hospitality Development and Promotion Board, which will monitor and facilitate hotel

project approvals. The allocation for Ministry of Tourism in the Union Budget 2013-14 has been increased by Rs

87.66 crore (US$ 14.13 million) to Rs 1,297.66 crore (US$ 209.30 million).

In a major boast to the North-East tourism sector, Mr K Chiranjeevi, Union Minister for Tourism, Government of

India, has approved Central Finance Assistance (CFA) to various tourism development projects in the states of

Arunachal Pradesh, Sikkim and Nagaland. The Ministry has approved CFA of Rs 25.04 crore (US$ 4.03 million) for

the ongoing tourism mega circuit projects at Tirupati and Kadapa district in Andhra Pradesh.

The Government has proposed to set up the Central Institute of Hotel Management (IHM), Catering Technology

and Applied Nutrition in the country. The IHM will be set up at Jagdishpur, Uttar Pradesh.

The Ministry of Tourism has undertaken joint development of tourist amenities at Amritsar and Rai Bareilli,

Trivandrum, Gaya and Agra Cantt Railway Stations in association with Ministry of Railways. CFA of Rs 10.28

crores (US$ 1.65 million), Rs 5.98 crore (US$ 964,453.42), Rs 5.18 crore (US$ 835,413.19) and Rs 5.05 crore (US$

814,141.59) has been provided by the Ministry for the same.

Road Ahead

The tourism, travel and hospitality industry in India is poised for unprecedented growth in the coming years.

With world tourist arrivals expected to increase by 43 million every year on an average from 2010 to 2030 and

FTAs in emerging countries is expected to grow faster than in advanced economies, a goldmine of opportunity in

tourism is waiting for India. The industry is likely to become more competitive due to the entry of additional

international flight operators, which would offer improved services to tourists.

Cruise shipping is one of the most dynamic and fastest growing components of the global leisure industry. India

with a vast and beautiful coastline, virgin forests, and undisturbed idyllic islands can be a fabulous tourist

destination for cruise tourists.

The Ministry of Tourism, Government of India, has consistently been working on improving India as a prime

destination for tourists. It further aims at promoting various Indian tourism products vis-à-vis competition faced

from various destinations and to increase India's share of the global tourism market.

Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale of

any financial instrument or as an official confirmation of any transaction. The information contained herein is from

publicly available data or other sources believed to be reliable but do not represent that it is accurate or complete and it

should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s affiliates shall not be in any way

responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained

in this report. This document is provide for assistance only and is not intended to be and must not alone be taken as the

basis for an investment decision.

Firstcall India Equity Research: Email – info@firstcallindia.com

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