Sector Update | 26 November 2019
IHIN outshines the pack
Lower corporate resistance to tariff hikes post GST rate cut, say players
We pored over 2QFY20 results and management commentary of key hospitality players
such as Indian Hotels (IHIN), Lemon Tree Hotels (LEMONTRE), Chalet Hotels (CHALET) and
EIH. Key insights highlighted below:
Aggregate revenue of players up 5%; IHIN’s EBITDA performance shines
Adj. EBITDA (for Ind-AS/one-offs)
2QFY20 and 1HFY20 aggregate revenues for the hospitality set – IHIN, CHALET,
and LEMONTRE (excluding EIH as its flight catering biz was impacted due to the
shutdown of Jet Airways) – grew 5% YoY, mainly due to the economic
slowdown. IHIN and LEMONTRE led the growth, while CHALET remained flat.
Aggregate EBITDA for the hospitality set grew 15%/13% for 2QFY20/1HFY20
driven by IHIN.
IHIN’s consolidated revenue grew 4% YoY to INR10.1b, while adj. EBITDA (adj.
for Ind-AS 116) increased 16% YoY to INR1.15b due to cost rationalization and
operating leverage. Standalone revenue/adj. EBITDA grew 5%/12% YoY to
INR6b/INR994m. Subsidiary revenue/adj. EBITDA grew 4%/58% YoY to
INR4.1b/INR159m and was driven by the US (cash losses reduced by INR40m)
and St James’ performance.
LEMONTRE witnessed robust 19% YoY growth to INR1.5b, mainly due to
inventory addition of 700 rooms (absent in the base quarter). Despite this, adj.
EBITDA grew only 12% YoY to INR404m due to pending stabilization of recently
commenced hotels and additional cost of INR22m.
CHALET’s revenue remained flat YoY at INR2.4b; however, after adjusting
EBITDA for exchange loss of INR389m in 2QFY19, EBITDA grew 16% YoY to
INR816m. Additionally, CHALET’s hospitality segment EBITDA after adjusting for
exchange loss (of INR367m in 2QFY19) declined 3% YoY to INR749m. Thus,
commercial segment aided overall EBITDA (up 5.6x YoY) to touch INR222m as
the ‘Sahar Office Tower’ got occupied.
EIH’s overall revenue declined 14% YoY to INR3.4b, primarily due to the loss of
the flight catering business from Jet Airways. EBITDA declined 58% YoY to
RevPAR across players up marginally
Hotels across India (industry) witnessed 3.1% YoY growth in RevPAR to INR3,254
during the quarter.
RevPAR in 2QFY20 grew 3.9% YoY to INR4,833, thus, outperforming in the
key markets of Mumbai (+6%), New Delhi (+8%), Chennai (+10%), Hyderabad
(+9%) and Bengaluru (+5%). IHIN’s domestic hotel network’s room/F&B revenue
grew 9%/4% YoY in the quarter. Note that IHIN’s (standalone) occupancy
improved by 430bp to 68.2% in 2QFY20; however, ARRs declined 4.5% YoY and
contained RevPAR growth to 1.7%.
Sumant Kumar – Research Analyst
(Sumant.Kumar@MotilalOswal.com); +91 22 6129 1569
Darshit Shah – Research Analyst
(Darshit.Shah@MotilalOswal.com); +91 22 6129 1546
26 November 2019
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.