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.
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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.
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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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