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Buy This Oberoi Group Stock For 38% Potential Upside: ICICI Securities
The Oberoi Group's foremost business, East India Hotels (EIH) Limited, is one of India's leading luxury hotel groups. Following the Q4FY22 results, ICICI Securities has given the stock a buy call rating with a target price of Rs 185, implying a potential upside of 38 per cent from the current market price of Rs 134.
Q4FY22 results of EIH as per ICICI Securities
- Revenues declined sequentially by 15.5% QoQ to Rs 265.6 crore (vs. I-direct estimate of Rs 2296.1 crore), ~62% of revenues at pre-Covid levels. On a YoY basis, revenues were up 41.3%.
- EBITDA margin declined to 8% vs. 21.7% in Q3FY22 due to lower revenues while expenses broadly remained flat QoQ).
- The company reported a net loss of Rs 7.3 crore vs. net loss of Rs 68.1 crore last year and net profit of Rs 32.6 crore last quarter.
Key investment rationale for EIH according to the brokerage
- Opening doors fully for foreign tourists (FTAs) from March 2022 to provide further fillip to leisure and business hotel room demand from FY23 onwards.
- Expect business to recover to pre-Covid levels (vs. ~97% projected earlier) with EBITDA surpassing pre-Covid levels by FY23E; margins are seen at 23%+.
- The recent venture into premium café business to lead to potential value unlocking of F&B segment in the long run. Strong b/s to support growth.
Buy for a target price of Rs 185
ICICI Securities has claimed that "The company has a strong b/s while strategic property locations provide visibility to ride on the long-term tourism growth story. Hence, we remain positive on the company with BUY rating on the stock. We value EIH at Rs 185 i.e. 26x FY24E EV/EBITDA."
Any further imposition of restriction on travel and companies adopting work from home policy beyond FY22 could further delay the recovery in business hotel segment are the two key risks for the stock as per the brokerage.
Disclaimer
The stock has been picked from the brokerage report of ICICI Securities. 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. Goodreturns.in advises users to check with certified experts before taking any investment decisions.
