Buy This Debt-Free Midcap Leisure Stock By Mahindra, With 110% Potential Upside: Top Brokerage

Mahindra Holidays & Resorts India Ltd. has a Zero debt balance sheet and it funds its Capex from customers' advance subscription money. During FY19-22, the company's revenue grew at a CAGR of 1.5% to Rs. 961 crore which was primarily driven by a 7.6% CAGR in vacation ownership revenue to Rs. 393 crore. Ventura Research, a top brokerage firm suggests investors buying the stock of Mahindra Holidays & Resorts India Ltd.

Stock To Buy: Target Price

The Current Market Price (CMP) of Mahindra Holidays & Resorts India Ltd. (MHRIL) is around Rs. 274. Ventura Research has estimated a Target Price for the stock at Rs. 576. This stock has the potential to give an 110.20% return, in the upcoming 1 year. It is a mid-cap stock with a market capitalization of around Rs. 5,499 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 274
Target Price	Rs. 576
Potential Upside	110.20%
52-week high share price	Rs. 313.60
52-week low share price	Rs. 185.60

Strong Financials

During FY19-22, MHRIL increased its member base to 2,65,980 (CAGR of 3.0%) and expanded its room inventory to 4,568 rooms (CAGR of 8.3%). Overall, revenue/ EBITDA/ PBT/ PAT grew at a CAGR of 1.5%/ 28.1%/ 25.6%/ 31.8% to Rs. 961 crore/ Rs. 235 crore/ 199 crore/ Rs. 146 crore, respectively, while EBITDA, PBT and PAT margins improved by 1227bps to 24.4%, 975bps to 20.7% and 827bps to 15.2%, respectively.

Stock Valuation

According to Ventura Research, "Time-share is a long-term cash flow generating business and thus we have used the DCF-based valuation method. We have discounted back the future cash flows of MHRIL to FY25and arrived at a standalone price target of Rs. 528 per share. We have given a 1.0X P/S multiple for MHRIL's European subsidiary HCRO which is contributing Rs. 48 per share to the consolidated price target of Rs. 576 per share, representing an upside potential of 110.2% from the current market price of Rs. 274 per share."

Growth Targets

Over the period of FY22-25E, MHRIL is targeting an inventory of above 5,500 rooms by FY25, and at the member-to-room ratio of 59X, we are expecting an active member count of 3,24,500 by FY25. VO and ASF are to grow at a CAGR of 11.0% to Rs. 538 crore and 8.2% to Rs. 390 crore, respectively. Occupancy could improve to 85% in FY25 and as a result, resort income is expected to recover at a CAGR of 28.1% to Rs. 405 crore.

Disclaimer

The above stock was picked from the brokerage report of Ventura Research. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.