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EIH to Underperform in Hotel Boom – Citi

December 3, 2007

Heightened economic activity in India and the busy Travel season may not cheer the lobbies of Oberoi groups EIH Hotels according to Citigroup analysts.

Smart investors who are holding to the stock can Book-Profits as the stock is likely to underperform in the near term. The stock now trades at a 27% premium to the hotel sector, post a 43% 3-month move, outperforming the hotel sector (10%) and market (13%).

EIH’s core revenues –growing strongly– are concentrated in Delhi, Mumbai, Bangalore (c82% of room revenues). However, it still lacks presence in upcoming growth markets like Chennai, Pune, Hyderabad, which could risk longer-term growth. The company has planned 6 new hotels in India, Hotels planned in Dubai, Maldives and Cambodia, Luxury train – JV with Indian Railways and Govt. of Rajasthan, and Luxury Nile Cruiser in Egypt.The company owns several real estate assets in Pune, Kolkata, Agra and Bhubneshwar, which it could potentially sell to fund its capex plans.

Fully Diluted EPS is expected to be Rs 6.48, Rs 7.71 and Rs 7.44 for FY08, 09 and 10 respectively. Citi has set a Target Price of Rs 146 on the stock and recommends to book profits.

Comments

One Response to “EIH to Underperform in Hotel Boom – Citi”

  1. Anonymous on December 14th, 2007 4:56 PM

    ITC Hotels are the India’s finest & fastest growing hotel chains. Fortune hotels are a part of the well thought-out growth strategy that brings out the mid-level business and leisure traveler under the ITC-Welcomgroup umbrella, offering full service properties without compromising on quality. Fortune hotels brings a range of full service hotels that sets new standards of professionalism in each destination, offering you great value for your money. These hotels have properties across the length and breath of the country. They are classified as business hotels in Chennai, Gurgaon, Ahmedabad. Experience luxury at its best in the rooms of Fortune hotels in India. You can choose from the Standard rooms, Fortune Club rooms and suites. The rooms in Fortune are well furnished and replete with classy luxury amenities. Fortune is also coming up with its openings of hotels in Pune, Visakhapatnam, Bengaluru, Navi Mumbai and Kolkata.

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