ITC Hotels: Neglected child - Views on News from Equitymaster

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

  • MyStocks

MEMBER'S LOGINX

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

ITC Hotels: Neglected child

May 14, 2002

The hospitality sector experienced one of its worst years in FY02. The slowdown, which took shape in 4QFY01 was beginning to result in lower business travel, negatively impacting the sector in early FY02. The real hit came from the events of September 11, which put brakes on global economic activity leading to drying up of business as well as leisure travel.

(Rs m) FY01 FY02 Change
Sales 1,329 1,121 -15.7%
Other Income 7 13 82.2%
Expenditure 1,057 1,047 -0.9%
Operating Profit (EBDIT) 272 74 -72.9%
Operating Profit Margin (%) 20.5% 6.6%  
Interest 29 26 -10.8%
Depreciation 98 99 1.5%
Profit before Tax 153 -38  
Extraordinary items (11) -  
Tax 15 (7)  
Profit after Tax/(Loss) 127 (31)  
Net profit margin (%) 9.5% -2.8%  
No. of Shares 30.2 30.2  
Diluted Earnings per share 4.2 -1.0  

Making matters worse, subsequent to the attacks on WTC, the country encountered increased terrorist activity, which further vitiated the travel environment. Aggravating the situation was the communal turmoil in Ayodhya and Gujarat. The industry did not get any chance to salvage a respectable performance in FY02. Increased competition from international hospitality chains exerted further pressure on operations of existing companies. Consequently, the industry offered heavy discounts through the year to lift occupancy rates. Much of these challenges are reflected in the topline performance of ITC Hotels.

Operating profits have been hit hard with a decline in sales and operating margins. As mentioned, the company is likely to have experienced pressure on occupancy rates and room tariffs leading to lower business volumes and realisations. Lower volumes seem to have reflected on key expenses, which have declined, but not commensurately. Staff costs have proved to be most sticky rising 10% during the fiscal. Heavy discounts are likely to have taken a toll on margins.

Despite a challenging year, the company has managed to control interest costs, which could be due to lower working capital requirement. Extraordinary items in FY01 pertain to sale of asset and voluntary retirement costs. VRS expenses are to be written over five years. The results do not mention the amount written off in the current year.

Over the past year, the scrip has steadily declined from its highs and is currently quoting at Rs 51. The 52-week high/low is Rs 74 / Rs 41. Recent expansions in hospitality, namely ITC - Grand Maratha, Mumbai, have been undertaken by the parent company, ITC. Consequently, concerns have cropped up on expansion plans and positioning of the subsidiary.


Equitymaster requests your view! Post a comment on "ITC Hotels: Neglected child". Click here!

  

More Views on News

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 am I Recommending Caution? (Fast Profits Daily)

Sep 9, 2020

This is why I have changed my short-term view on the market.

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.

More

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

TRACK ITC HOTELS

  • Track your investment in ITC HOTELS with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

MARKET STATS