Edelweiss’ research report on Mahindra Holidays and Resorts
Mahindra Holidays & Resorts’ (MHRL) Q1FY18 revenue, at INR 2.7bn, grew 8% YoY driven by 10% YoY jump in member addition to 4,005. While employee expenses rose a sharp 28% YoY, lower sales & marketing spends due to savings in digital marketing led to flat EBITDA at INR 573mn. Driven by higher other income, PAT rose 7% YoY to INR 323mn. It added 55 rooms in Q1FY18 at Naldhera.
While the stock has run-up recently, we believe MHRL’s focus on adding right quality members will spur profitability along with moderation in receivables, boosting cash generation. Considering the debt-free nature along with expected cash flow generation potential in the long run, we change our valuation methodology for the standalone business to an average of P/E and DCF, giving us TP of INR 444. We maintain ‘BUY’.