15 November 2014
2QFY15 Results Update | Sector:
Travels
Cox & Kings
BSE SENSEX
28,047
Bloomberg
Equity Shares (m)
M.Cap. (INR b) / (USD b)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
S&P CNX
8,390
COXK IN
136.5
42.1/0.7
366/94
0/79/131
CMP: INR306
TP: INR380
Buy
Financials & Valuation (INR m)
Y/E MAR
Net Sales
EBITDA
Adj PAT
EPS (INR)
Gr.h (%)
RoE (%)
RoCE (%)
P/E (x)
P/BV (x)
2015E 2016E 2017E
25,179 24,029 27,151
10,068 9,419 10,616
3,828
28.0
50.0
23.1
12.7
10.9
2.7
3,738
27.4
-2.4
139.7
21.6
14.3
11.2
2.2
4,549
33.3
21.7
170.7
21.5
16.2
9.2
1.8
BV/Sh.INR 114.1
Results below estimates:
COXK reported overall revenue of INR8.8b (est. INR9.2b)
in 2QFY15, against INR8.2b in 2QFY14, marking a YoY growth of 6%. EBITDA
margin de-grew by 300bp, from 55.3% in 2QFY14 to 52.3% (est. 54.7%). Margin in
Leisure India and Education business expanded while Leisure international
business declined. PAT stood at INR(-942m) (est. INR2.67b), against INR2.63b in
2QFY14, primarily due to extraordinary writeoffs of goodwill on account of
camping sale amounting to INR5.5b and cancellation charges of forward contract
amounting to INR1b. Adjusting for this, PAT stood at INR2.7b, against INR1.7b,
making a YoY growth of 59.5%.
Strong growth in Education and Meininger business to drive margins:
During the
quarter, Education business posted revenue of INR2b, growing at 10% YoY, while
EBITDA grew 19% to INR1.1b. PGL and NST are showing strong performance, with
65% capacity utilization assisted by better utilization in lean season. Management
is planning to add 1,000 beds going forward in Australia and France, which will
drive growth. Meininger reported a revenue growth of 9% to INR950m, while
EBITDA growth was 17% to INR470m. It marked occupancy of 92%, against 87% in
FY14. Realization improved by 5.4% from 36 euro/bed to 27.4 euro/bed.
Management believes that demand exceeds supply, thus driving the higher
occupancy. Pre-booking for Meininger has already reached ~80% for FY16 and
12% for FY17, a testimony of robust demand.
Debt reduction on course:
With the sale of camping business, debt reduction in
on course, with net debt standing at INR34.7b, against INR39.6b in 1QFY15.
Management guided for further debt reduction of INR2b in FY15 and INR5b in
FY16 and FY17 each. We believe the company is on course for a debt reduction,
which will reduce net debt/equity to 1.2 by FY17E.
Valuation and view:
We remain optimistic on Education and Meininger business’
growth, given the capacity addition. We believe COXK is on the path of
deleveraging its balance sheet led by the sale of camping business. Company is
expected to post ~21% PAT CAGR over FY14-17E. The stock trades at 10.9x FY15E
and 11.2x FY16E earnings. We value COXK at 14x FY16E earnings of INR27.4, with a
target price of INR380. Maintain
Buy.
Niket Shah
(Niket.Shah@MotilalOswal.com); +91 22 3982 5426
Atul Mehra
(Atul.Mehra@MotilalOswal.com); +91 22 3982 5417
Investors are advised to refer through disclosures made at the end of the Research Report.