@Naresh

Castrol gave an important breakout at 150-160, based on range breakout and falling trendline breakout. Since then it has been in a strong uptrend. Fundamentals wise I dont track it too closely. In bull markets whenever a stock goes up a lot of fancy stories are made up and floated around. I would be careful to take these at face value. These need deep digging and analysis. I don’t have any position or views on it now. Best time to buy was at time of breakout.

Result update:-

Sumuka Agro– Sumuka has posted its profit of 80lakhs which is lowest in 4 qtr. Margin has been continuesly following from 13% gross to 6% now. Sumuka is seeing pressure in its bottom line. Although revenue posted by company is record high. Generally this pressure is seen when company wants to enter in market and wanna gain some market share.
Distribution – products are still not found on online on AMAZON and Dmart, only 2 sku were visible on flipcart

Jupiter life line hospital:- company has posted its highest profit this qtr, partly due to its repayment of debt. Company is walking the talk they said IPO funds will be used to repay its debt and they have done this. Company operate independently on
owned land.The proportion of the Indian population of 60 years or more is expected to rise to 12.5% by 2026 from nearly 8% in 2011

        Capex update:- Company is doing a capex  in Dombivali east for 500 beds. Kalyan dombivali region comes under smart city plan of central goverment. Project is very near to Lodha palava city and proposed metro line. Many residensial real estate plans are about to be completed.

Above image shows 2 senario
Senario 1 – project completed in FY 2026. Considering 20% growth annualy on existing hospitals and adding 100cr qtrly revenue in top line. (100cr calculation as below
500 beds – 50% occupency – 50000ARR) . With net profit % at 15% 2026 profit would be 243 cr and 2027 350 cr while taking 50 multiples i have come to target market cap.

Senario 2 -project compeltion in FY 2027.Considering 20% growth annualy on existing hospitals and adding 100cr qtrly revenue in top line in FY 2027. with Annual profit of 280 cr and multiple of 50 market cap would be 14000cr

Risk and threats

1. Delay in dombivali project compelation
2. Growth of less than 20% in top line
3. Reduction in Net profit %

With above optimist senario CAGR return which can be make seems low and compnay is fairly valued at this price.

In what way operator stocks are different from pump and dump stocks? Can you elaborate more on operator stocks?

• 4800+ Rooms across 31 Hotels

• Owns the properties – Refurbishes, renovates and then lets out the hotel to big hotel brands to manage it

• Samhi doesn’t manage or operate the hotels itself

• Passes on the management fees and retains the F&B and rental incomes

• 75% is room rental; 25% from F&B

• Hotels / Brands:

  • Courtyard by Marriott
  • Fairfield by Marriott
  • Sheraton by Marriott
  • Renaissance by Marriott
  • IHG
  • Hyatt Place
  • Hyatt Regency
  • Holiday Inn

• Owned by Samhi and managed by Marriott / IHG / Hyatt (charges mgmt. fees to Samhi)

• 90% of their revenues come from Tier-1 cities

• Hotel traffic tends to be higher in these cities

• ARRs are higher in these cities

• Good geographical diversification protecting it from unforeseen situations in a certain city / region

• Focuses a lot on office space absorption, which is on the rise (lot of scope in cities like Bangalore, Mumbai, etc.)

• Commercial activity has picked up and expected to stay robust going forward

• Air passenger traffic remains strong, showing good travel demand

• Demand is not a problem as per management

• Creating supply takes time and that provides companies like Samhi with high pricing power – driving up the ARR, Occupancy and therefore, the RevPar

• Good time to play the upcycle until the supply comes in and demand starts peaking in a few years

• Three categories of hotels:

  • Upper Upscale – ARR – 9300+ (43% of Revenues)
  • Upper Midscale – ARR – 5700+ (42% of Revenues)
  • Midscale – ARR – 3700+ (15% of Revenues)
    

• Remains a debt heavy company, but most of the IPO proceeds have been used to pay off the debt (900Cr used for debt reduction) – finance cost has fallen

• Management expects the growth in profitability to aid in debt reduction going forward

• RevPAR is on the rise, growing at 20% YoY in the recent quarter

• EBITDA margins at 32%

• ACIC Hotel Chain acquired. Being managed by Samhi as of now, will be passed on to Marriot to manage by Q1 or Q2 FY24

• 962 rooms in ACIC Portfolio; 22% of the revenues as of now

• As all these rooms become operational and occupied, EBITDA margins are expected to touch 40%+ (8-10% improvement)

• Being a primarily business hotel model, occupancy on weekdays is better for Samhi compared to weekends (78-80% on Tue, Wed and Thu; 64-67% for Sat-Sun)

• Weekend occupancy is also expected to improve in FY25-FY26 as per mgmt.

• Not acquiring too many new hotels; major focus is on increasing revenues from existing hotels through renovation and refurbishment

• Made provision for lease cancellation issue of around 7Cr

• Finance cost has come down from 132Cr to 65Cr; expected to come down further as they deleverage

• Samhi is pursuing a long term lease arrangement (which will be tied to revenues)

• Will become a completely asset light model – reducing depreciation and help margins further

• Expecting strong H2 performance in FY25 with new inventory boosts

• Looking to turning profitable by Q1FY25

Risks:

• Extremely cyclical sector
• Company has a lot of debt
• Yet to turn profitable

Disc: Invested