Tag - travel

08 Nov

Expect Revenues to go up due to easing travel restrictions – VIP Industries

Update on the Indian Equity Market:

On Monday, NIFTY closed at 18,068 (+0.9%) led by PSU BANK (+2.2%), CONSUMER DURABLES (+2.1%), and OIL&GAS (+1.8%). Those in red were PRIVATE BANK (-1.0%), PHARMA (-0.7%) and HEALTHCARE (-0.6%). Top gainers in NIFTY50 were TITAN (+4.5%), IOC (+4.5%), and BAJAJFINS (+4.2%). The top losers were INDUSIND BANK (-10.5%), DIVIS LAB (-5.2%), and M&M (-1.4%).

Excerpts of an interview with Mr. Dilip Piramal, Chairman, VIP Industries with CNBC-TV18 on 02nd November 2021:

  • The company had a sales budget of Rs 5000 mn in the 1QFY22. However, 1QFY22 performed poorly due to the second wave of the covid-19 pandemic but things improved in September due to the opening up of restrictions.
  • During the first 15 months of the pandemic, there were hardly any sales, hence the company did not import from China. In 1QFY21 company had more inventory than what they sold in FY20.
  • Supply has been disrupted very badly, till pre covid levels the company was dependant on China heavily. The Chinese supply has become very uncertain and expensive and hence the company is facing a lot of issues concerning supply in the market. It intends to reduce its dependence on China for raw materials.
  • There is a lot of turbulence in the market from the supply side due to higher freight costs and inflation, problems with imports of, both, raw materials and finished goods from China.
  • Freight costs have gone up, which affects the company significantly as luggage being a voluminous product, freight is a considerable cost.
  • Usually, the 3rd quarter is the best quarter for the company with the wedding and travel season in full swing. With the gradual opening up of economies and travel, the company expects good revenues going forward.
  • The company is positive and expects 3QFY22E will be better than the 3QFY21. The company expects revenue to be in the range of -10% to +10% from the 3QFY19 levels which is Rs 4,300mn.
  • The company hasn’t taken any price hikes as of now but they would be looking at taking price hikes very shortly. Revenues on an MoM basis should be better than in earlier months.
  • All the manufacturing of the hard luggage which accounts for 47% of the 2QFY22 revenue is done in India. Not too much manufacturing in India for soft luggage.
  • Mass and premium segment bags were affected since a majority of sales occurred in the malls and malls were badly affected in the pandemic.

Asset Multiplier Comments

  • The Ministry of Civil Aviation removed restrictions on domestic flight capacity and allowed to operate flights at full capacity. Luggage being the proxy to the travel and tourism industry we think VIP Industries is well placed to meet the increasing demand.
  • Looking at the capex plans of expanding the capacity of Bangladesh and Nashik plants, price hikes, margins delivery, and product launches we expect VIP Industries to perform well going ahead.

Consensus Estimate (Source: market screener website)  

  • The closing price of VIP Industries was ₹ 634/- as of 08-November-21. It traded at 111x/50x/37x the eps estimate of ₹ 5.7/12.6/17.1 for FY22E/ FY23E/FY24E respectively.
  • The consensus target price of ₹ 646/- implies a Price/earnings multiple of 33x on FY24E EPS of ₹ 19.6/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By VIP Industries , , , 0 Comments Read more...
09 Apr

Hospitality industry will see strong recovery after crisis ends: Indian Hotels

Update on the Indian Equity Market:

On Wednesday, Nifty closed -0.5% lower at 8,749.  The top gainers for Nifty 50 were Vedanta (+3.7), Sun Pharma (+4.8%) and Cipla (+4.6%) while the losing stocks for the day were Shree Cement (-3.8%), TCS (-3.8%) and Titan (-3.7%). The sectoral gainers were NIFTY Pharma (+3.5%), NIFTY Auto (+1.9%) and NIFTY Media (+1.8%). The losing sectors were NIFTY Realty (-1.4%), NIFTY IT (-0.8%) and NIFTY Bank (-0.6%).

Edited excerpts of an interview with Mr Puneet Chhatwal, MD and CEO of The Indian Hotels Company Ltd.; dated 7th April 2020. The interview aired on CNBC-TV18.

  • The travel, tourism and hospitality sector has been hit hard across the world in early March.
  • In India, occupancy levels at hotels are close to zero due to the nationwide lockdown. Indian Hotels reveals that the average occupancy rate at the group’s hotels has fallen by 90%. Hotels are more or less empty, with some islands of excellence in extended stays at Indian Hotel apartments in Mumbai, which are always occupied.
  • The Indian hospitality and tourism business has another equally important component and that is the food and beverage business. With all the restaurants, bars, gym, salon and spas shut, the revenue drop is significant for the industry, according to Mr Chhatwal.
  • According to Mr Chhatwal, the international business would recover completely only by January 2021. If Indian Hotels get recovery, the recovery could be very strong especially on the domestic front. The international front will take a long time, but the Indian market is very much influenced by the domestic side of the business and that is the key at least in FY21E.
  • According to him, it is too early to calculate the economic damage due to this crisis. The hospitality business slowed down 10 days prior to the imposition of the restrictions. Within a week or 10 days, the industry will have clear visibility about the damage.
  • Mr Chhatwal says Indian Hotels would not reduce tariffs to attract customers to post the crisis ends. The reduction in prices or tariff is not a long term strategy but is a tactic to survive maybe for a few months. Ultimately if pricing is a strategy, then in Indian Hotel, it is the beginning of the end, according to him. So, at the moment their key priority will be the safety and security of their guests, and medical staff that is staying with them in different properties in Mumbai.

Consensus Estimate: (Source: market screener website)

  • The closing price of The Indian Hotels Company Ltd was ₹ 75/- as of 8-April-2020. It traded at 26.8x/ 23.4x/ 16.7x the consensus EPS estimate of ₹ 2.8/ 3.2/ 4.2 for FY20E/ FY21E/ FY22E respectively.
  • The consensus target price of ₹ 154/- implies a PE multiple of 34.2x on FY22E EPS of ₹ 13.
By Indian Hotels , , , 0 Comments Read more...