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EIH: 3QFY01 operating profits up 125%

Jan 25, 2001

EIH, India's second largest hotel chain has reported a net profit of Rs 277 m for the 3QFY01, a growth of 80% YoY. This quarter marks the beginning of the peak season for the hotel industry. The company's operating profit margins have gone up from 13.8% in the 3QFY00 to 26.4% in the 3QFY01, an increase of 1,255 basis points.

(Rs m) 3QFY00 3QFY01 Change 9mths FY00 9mths FY01 Change
Sales 1,109 1,309 18.0% 2,990 3,466 15.9%
Other Income 124 87 -29.6% 280 266 -5.1%
Expenditure 956 964 0.8% 2,558 2,776 8.5%
Operating Profit (EBDIT) 153 345 125.2% 432 690 59.9%
Operating Profit Margin (%) 13.8% 26.4%   14.4% 19.9%  
Interest 32 53 67.0% 119 149 25.0%
Depreciation 59 67 12.7% 178 198 11.2%
Profit before Tax 186 313 68.0% 414 609 47.0%
Other Adjustments 10 11   29 32  
Tax 22 25 11.7% 49 48 -2.9%
Profit after Tax/(Loss) 154 277 79.8% 336 529 57.3%
Net profit margin (%) 13.9% 21.2%   11.3% 15.3%  
No. of Shares (eoy) (m) 52.4 52.4   725.0 958.0  
Diluted number of shares 52.4 52.4        
Diluted Earnings per share* 2.9 5.3        

This excellent performance of the company has been driven by higher average room rates and higher occupancy rates in the company's metro city hotels which account for 80% of the company's profits. The company had revised its room tariffs in its prime properties by 5%-10% in October 2000, this too attributed to the rise in its revenues.

The company's revenues grew by 18% YoY during this period. The company through its strict cost control measures has managed to curtail its operating expenses growth at less than 1%. This resulted in a stupendous growth in operating profits by 125% to Rs 345 m for the 3QFY01.

  1QFY00 1QFY01 2QFY00 2QFY01 3QFY00 3QFY01
Operating Profit Margin (%) 18.9% 20.6% 11.0% 12.0% 13.8% 26.4%

The company's operating margins have risen substantially in the 3QFY01 in comparison to the previous two quarters of 2001 as the fortunes of the industry pick up during the 3Q and 4Q as it is the peak season for tourists.

The company's interest costs have gone up as a result of its ongoing expansions in Himachal Pradesh and Rajasthan.

As these results are higher than our expectations we will need to relook at our full year forecast for FY01E. We are currently projecting a net profit of Rs 958 m for FY01E and will need to revise this upwards by around 20% YoY.

On the current price of Rs 220 it is trading at 12.0x FY01E EPS of Rs 18.3.

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