Multi Bagger - Mahindra Holidays & Resorts India Ltd

[UAE Exchange Etrade]

NSE ID : MHRIL

CMP - Rs.290/-

Company Overview:

Mahindra Holidays & Resorts India Ltd. (MHRIL) is a part of the Mahindra Group and  offers a unique vacation ownership ( popularly known as Time Share) model to Indian consumers with resorts spread across India, Australia, Malaysia and Thailand. The company has different schemes for families, singles and corporate.  Started in 1996, the company's flagship brand 'Club Mahindra Holidays', today has a fast growing customer base of over 150,000 members and 27 resorts at some of the most exotic locations in India and abroad.

Financial Analysis:

Q3FY13 numbers were reasonable with Net Revenues up 12.7% to 179Crs, EBITDA up 17% to 47Crs and Net Profit up 13% to 30Crs. Sale of Vacation Ownership constituted approximately 70% of Total revenue, Annual Subscription Fee constituted 16% and the balance 14% was Resort Income.

Sales & marketing expense margins dipped 3% YoY to 26%. The room occupancy spiked from 78% in Q3FY12 to 83% in Q3FY13. Online bookings surged from 26% in Q3FY12 to 40% in the quarter. Also, only 4% of the rooms were provided to nonmembers which displays MHRIL's focus on increasing member satisfaction.

Positives:

With its unique business model, MHRIL is in a sweet spot to exploit the growth in the Indian travel and tourism sector. The aggressive addition of the room inventory will give the company potential to increase its member base, especially in peak seasons, which will help the company to target the higher revenues.

Other positives that it enjoys are -

Part of Mahindra Group and holds a commanding position in the market.

Market leader in vacation ownership and leisure hospitality business.

It enjoys a unique business model of funding through internal accruals and Membership fee, both non interest bearing sources which help it to maintain debt at negligible levels.

Apart from the Flagship brand Club Mahindra; its other brands Zest Breaks, Fundays etc. are also doing well.

In the last 5 years, the room inventory has gone up 3 times and membership is growing at CAGR of 22%.

Memberships coming from Dubai and other overseas location.

Valuations:

We expect robust building of room inventory and addition of members to enable it to grow its topline at 21% CAGR during FY12-14E. EBITDA margins are expected to increase from 16.5% in FY12 to 21.3% in FY14E, which will result in PAT growth of 24% CAGR over the FY12-14E.

Trading at the CMP of Rs 290, at 22 times estimated EPS of 13, Mahindra Holidays & Resorts India Ltd. is a good long term buy with a 12 month target of Rs.350