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Hotel Leelaventure: Turning the corner - Views on News from Equitymaster

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Hotel Leelaventure: Turning the corner

Jul 14, 2010

Hotel Leelaventure Limited has announced its 1QFY11 results. The company has reported a 25% YoY growth in its sales while net profits have increased by 789% YoY. Here is our analysis of the results.

Performance summary
  • Top line of Hotel Leelaventure increased by 25% during the quarter on the back of economic recovery.
  • Operating (EBITDA) margins increased by 7.5% to stand at 30% during the quarter. This increase in margins has been due to lower costs of material, staff costs, power and fuel and other expenditure as a percentage of sales.
  • Net profits increased by a spectacular 789% YoY on the back of higher operating income and lower interest costs during the quarter.


Consolidate financial picture
Rs(m) 1QFY10 1QFY11 Change
Net sales 847 † 1,058 24.9%
Expenditure 658 †742 12.8%
Operating profit (EBDITA) 189 †316 67.0%
Operating profit margin (%) 22.3% 29.8%
Other income 40 †42 5.2%
Interest 64 †57 -11.9%
Depreciation 161 †186 15.7%
Profit before tax ††4 †115 2645.2%
Extraordinary items ††7  
Tax ††1 †23 2190.0%
Profit after tax/(loss) 10 †92 788.5%
Net profit margin (%) 1.2% 8.7%
No. of shares (m) 378 †378
Diluted earnings per share (Rs)*   1.3  
Price to earnings ratio (x)*   39.5  
* 12 month trailing earnings

What has driven performance in 1QFY11?
  • The top line of Hotel Leelaventure saw strong growth aided by higher buoyancy seen in the hotel sector, marked by an increase in influx of foreign tourists. This is a sign of recovery for the sector.

    Cost break-up
    As a % of net sales 1QFY10 1QFY11
    Total Cost of goods 7.9% 7.1%
    Staff Cost 25.3% 23.4%
    Power and fuel 12.6% 10.9%
    Other Expenditure 31.9% 28.7%

  • Operating profit for the year increased by 67% YoY. This was due to lower growth in cost of goods, staff costs, power and fuel cost and other expenditure as compared to the top line.

  • Net profit margin increased by 7.5% during the year as a result of higher sales and lower operating costs during the year.

What to expect?
At a price of Rs. 51.4, the company is trading at 39.5 times its trailing twelve month earnings. As a result of an economic recovery, we are witnessing a recovery in sales growth. The company is taking advantage of its positioning in the luxury segment and position in the metros, benefiting from increase in foreigner and leisure traffic. The company has six properties with over 1,600 rooms. The company has a new 260 room property coming up in Delhi which is expected to be operational before the Commonwealth games. A 332 room property in Chennai is also coming up and is expected to be operational by mid 2011. These two properties will take the room inventory of the company to over 2,162 rooms. However, FCCB worth Euro 39.2 m maturing in September this year and FCCB worth US$ 67 m maturing in April 2012 is a cause for concern.

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