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 Announces Quarterly Results (3QFY20); Net Profit Up 17.4% (Quarterly Result Update)

Jan 27, 2020 | Updated on Jan 27, 2020

For the quarter ended December 2019, EIH has posted a net profit of Rs 750 m (up 17.4% YoY). Sales on the other hand came in at Rs 4 bn (down 4.9% YoY). Read on for a complete analysis of EIH's quarterly results.

EIH Announces Quarterly Results (2QFY20); Net Profit Up 54.8% (Quarterly Result Update)

Nov 8, 2019 | Updated on Nov 8, 2019

For the quarter ended September 2019, EIH has posted a net profit of Rs 410 m (up 54.8% YoY). Sales on the other hand came in at Rs 3 bn (down 13.7% YoY). Read on for a complete analysis of EIH's quarterly results.

EIH 2018-19 Annual Report Analysis (Annual Result Update)

Jul 24, 2019 | Updated on Jul 24, 2019

Here's an analysis of the annual report of EIH for 2018-19. It includes a full income statement, balance sheet and cash flow analysis of EIH. Also includes updates on the valuation of EIH.

Chalet Hotels IPO: Should You Bet on This High-End Hotel Chain Owner? (IPO)

Jan 29, 2019

Should you subscribe to the IPO of Chalet Hotels Ltd?

More Views on News

Most Popular

How the 8-Year Cycle Can Help Identify Multibaggers (Fast Profits Daily)

Sep 11, 2020

This is how you can apply the greed and fear cycle in the market to pick stocks.

Why We Picked This Small-cap Stock for Our Hidden Treasure Subscribers (Profit Hunter)

Sep 17, 2020

This leading household brand will profit big time in a post covid world.

This Could Be the Best September for Auto Stocks (Profit Hunter)

Sep 11, 2020

Here's why I think this month could be a great for auto stocks.

What Do the Charts Say About Buying Smallcaps Now? (Fast Profits Daily)

Sep 18, 2020

Everyone seems to be excited about buying smallcaps now...but is it the right thing to do? What do the charts tell us? Find out in this video...


Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms


Sep 24, 2020 11:09 AM