MHRIL has a membership base of over 1.6 lacs families having grown at 15 percent CAGR over last 5 years. Its customer centric and price sensitive product offerings covering middle and upper class of the society taps the right cords needed in an Indian environment.

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STOCK INFO
BSE 533088
NSE MHRIL
Bloomberg MHRL.IN
Reuters MAHH.BO
Sector HOTELS
Face Value (Rs) 10
Equity Capital (Rs mn) 880
Mkt Cap (Rs mn) 26,407
52w H/L (Rs) 308/206
1m Avg Daily Volume (BSE+NSE) 237,844
SHAREHOLDING PATTERN %
(as on 31st Mar. 2014)
Promoters 75.0
FIIs 12.1
DIIs 1.6
Public & Others 11.3
Source: BSE, NSE India, Capitaline, Company, IndiaNivesh Research
STOCK PERFORMANCE (%) 1m 3m 12m
MHRIL 26 27 22
NIFTY 13 18 28
Source: BSE, NSE India, Capitaline, Company, IndiaNivesh Research
Nivesh Discovery
June 9, 2014
CMP : Rs.300
Rating : BUY
Target : Rs.367
Rating : NR
Target : NR
Current Previous
(NR-Not Rated)
Dharmesh Kant
AVP - Strategies & Fund Manager (PMS)
Mobile: +91 77383 93372
Tel: +91 22 66188890
dharmeshh.kant@indianivesh.in
Mahindra Holidays And
Resorts India Ltd.
Mahindra Holidays And
Resorts India Ltd.
Mahindra Holiday and Resorts India Ltd. (MHRIL) is a prominent player in the
Indian Leisure hospitality industry. It is a market leader in vacation ownership
industry which still remains largely untapped in India. With economy looking to
turn for an upward spiral disposable income at the hands of both urban and rural
Indian will increase. Rapid urbanization coupled with increasing desire to improve
quality of life among average Indians bodes well for Indian leisure industry.
Listed below are key rationales for accumulating MHRIL:
1) MHRIL has a membership base of over 1.6 lacs families having grown at 15
percentCAGRoverlast5years.Itscustomercentricandpricesensitiveproduct
offerings covering middle and upper class of the society taps the right cords
needed in an Indian environment. We expect the new membership additions
to grow at a rate of around 15 percent in FY’15 and FY’16.
2) It presently has 40 resorts at some of exotic locations across India and its tie
up with RCI (the largest time share body in the world) gives it access to over
6500 resorts across the globe. It is well poised to take maximum advantage of
rapidly growing base of affluent families in the country.
3) MHRIL stands on a strong balance sheet being net debt free. It has funded
all its capex through internal accruals. It has strong mix of upfront and annuity
based cash flow model. Fixed assets for the company have grown on an
average rate of over 20 percent during last seven years.
4) For last five years it has delivered an average top line growth of around 13
percent. In FY’14 its operating profit margin stood at 19.62% and net profit
margin at 10.66% both came lower than FY’13. Drop in operating profit margin
and net profit margin was on account of higher food prices, employee cost
and operating expenses. We expect company to rationalize expenses more
prudently and achieve better operating efficiency. Top line has shown sign of
pick up in Q4FY14 posting a growth of 12.47% y-o-y and 15.82% q-o-q while
margins remained stable on q-o-q basis.
5) From FY’09 to FY’14 a period marked by decelerating economy its sales grew
by an average rate of 13.05 percent while between FY’04 to FY’08 a period
marked by accelerating economy sales delivered an average growth rate of
over 40 percent. Given the fact that sentiments have turned positive and
assuming economy returns back to growth path in FY’15 , we expect MHRIL
to deliver top line run rate of 20 percent in FY’15 and 25 percent in FY’16.
6) The stock is available at reasonable valuation multiples. It is trading at a P/E
multiples of around 30x (TTM basis) at CMP of 300; historically it has
attracted higher P/E multiples of 40 to 44 during periods of positive
sentiment and high growth. In last 5 years its net worth grew by 220% while
stock price is down 35%.
7) Assuming in FY’15 MHRIL delivers revenue growth of 20% and PAT margin
stands at 11%, its EPS works out to be Rs.12.24. Valuing the company current
P/E multiple of 30x for FY’15 on aforesaid assumption the valuation comes
at 367.
We recommend buy and accumulate on MHRIL for a target price of 367.
YE March (Rs. Crores) REVENUE EBITDA PAT EBITDA % PAT % EPS (Rs.) P/E (x)
FY12A 649.68 172.11 102.33 26.49% 15.75% 11.55 25.97x
FY13A 744.03 178.50 90.92 23.99% 12.22% 10.12 29.64x
FY14A 816.37 160.20 87.02 19.62% 10.66% 9.90 30.30x
Source: BSE, NSE India, Capitaline, Company, IndiaNivesh Research
Source: BSE, NSE India, Capitaline, Company, IndiaNivesh Research

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Mahindra Holidays And Resorts India Ltd. (contd...)
June 9, 2014 | 2Nivesh Discovery
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