EIH: Steady performance - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

EIH: Steady performance

Apr 20, 2001

EIH, India's second largest hotel chain's share price has been quite steady over the past few months. This despite the market tanking during this period. Earlier investors were worried that EIH's share price run up was more due to buying by ITC's investment companies who were keen to increase their stake in this profitable hotel company, with a view to takeover. However, the company's excellent performance in 3QFY01 has resulted in keeping up its share price, even after these investors have reduced their stake. The company reported a net profit of Rs 277 m for 3QFY01, a growth of 80% YoY. EIH's operating profit margins have gone up from 13.8% in 3QFY00 to 26.4% in 3QFY01, an increase of 1,255 basis points.

This was the result of higher occupancy rates and average room rates at its prime hotels in Mumbai, Delhi, Bangalore and Calcutta. Also the company's increasing presence into the leisure hotel segment in the past couple of years has helped in shoring up its revenues. The company has opened hotels in Rajasthan and Shimla. It also has plans for other tourist destinations like Kerala.

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

To improve its operations further and to keep up with the increasing competition in the luxury hotel market in India the company is on the look out for a tie-up with an international hotel company. This will help the company increase its brand presence in the large markets of Europe and USA.

In terms of future valuations, EIH's price to earnings multiple is expected to remain more or less steady at current levels. This stems from the likelihood that growth in the hotel sector is expected to be on an upswing in the next two years, however the fear of increasing competition in Mumbai and Delhi is likely to keep valuations at moderate levels. Even though EIH derives over 52% of its profits from its South Mumbai hotels, and is in that sense protected from the increasing competition in North Mumbai, the sentiment and fear about higher competition will keep its valuations at more or less the same levels.

Hence any increases to stock price performance will come from higher revenues and an improvement in operating profit margins, the probability of which is quite good.

On the current price of Rs 213, EIH is trading at 8.7x FY02E EPS of Rs 24.4 and on a net asset value per share basis it is trading at a 40% discount to its NAV per share of Rs 353.

Equitymaster requests your view! Post a comment on "EIH: Steady performance". Click here!


More Views on News

EIH 2020-21 Annual Report Analysis (Annual Result Update)

Aug 12, 2021 | Updated on Aug 12, 2021

Here's an analysis of the annual report of EIH for 2020-21. It includes a full income statement, balance sheet and cash flow analysis of EIH. Also includes updates on the valuation of EIH.

Revenge Travel is Here. 9 Stocks Likely to Benefit (Views On News)

Sep 4, 2021

The term 'revenge travel' refers to the desire of going on a vacation after an extended period of lockdown.

Why Did Shares of Jubilant FoodWorks Rally Today? (Views On News)

Jun 16, 2021

The company sees a 90% recovery despite minimal dine-ins.

Why Did Burger King India Shares Plunge 7% Yesterday? (Views On News)

May 28, 2021

Key takeaways from Burger King India Q4FY21 results.

Indian Hotels Q4 Review: Reports Net Loss, Revenue from Operations Decline (Views On News)

May 3, 2021

Key takeaways from Indian Hotels Q4FY21 results.

More Views on News

Most Popular

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

How to Hit Rs 100 Crore Wealth in Your Lifetime (Equitymaster Wealth)

Nov 15, 2021

This is how you can achieve the ambitious goal of a net worth of Rs 100 crore.

Don't Sell these Stocks if the Market Falls (Profit Hunter)

Nov 17, 2021

These are the 3 types of stocks that you should not sell in a market crash.

MobiKwik IPO Opens for Subscription Soon. Key Things to Know Before Subscribing. (Views On News)

Nov 20, 2021

The Rs 19 bn issue is set to hit the market soon.


Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms


Nov 26, 2021 (Close)