The broking house said, Viceroy Hotels came out with lower-than-expected Q3FY10 numbers. The company reported net sales of Rs 238 million, down 16.1% YoY, up 13.2% QoQ as against our expected net sales of Rs 251 million. The quarterly growth in revenues was lower compared with other peer companies mainly on account of the ongoing Telangana issue, which resulted in a revenue loss of Rs 35 million for the quarter. Margins were impacted by lower-than-expected growth in revenues and rise in operating costs. However, QoQ it grew by 230 bps to 31.1%. Net profit for the quarter stood at Rs 24 million as against Rs 16 million last year and Rs 3 million last quarters.
The broking house pointed out at the CMP of Rs 43.6, the stock is trading at 20.5 times its FY11E and 12.1 times it`s EV/EBITDA, respectively. Going forward, we expect it to benefit from easing liquidity concerns and improving outlook for the hotel industry coupled with additions of new five star hotels in Chennai and Bangalore. However, the Telangana issue remains a short-term concern. The broking house have valued the stock on an NAV basis and arrived at a target price of Rs 52 per share. Based on this, we are upgrading our rating from ADD to Buy.
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