Royal Orchid Hotels Ltd Research Report

Company Overview

Royal Orchid Hotels is one of India’s fastest growing hotel chains. It primarily operates 5 and 4 star hotels, service apartments and budget hotels enabling it to target the discerning business and leisure traveler.

It currently operates 49 hotels across 35 locations in India.

The company operates under flagship brands – Royal Orchid, Royal Orchid Central, Royal Orchid Suites, Regenta Hotels & Regenta Inn.

Royal Orchid has a total of 3414 rooms as on Q2FY19.

Key Highlights

 Revenue from Operations went up by 9.1% y-o-y to INR26.96 crores. EBITDA for Q2 was at INR4.89 crores up by20.2%.

 PAT was flat at INR3.03 crores as against INR3.2 crores primarily due to higher tax expenses which has gone up by ~100% y-o-y.

 EBITDA margin for the quarter was at 18.1% and the PAT margin was at 11.2%.The EBITDA margin improved by 168 basis points where as PAT margin declined by ~150 bps.

 PBT for the period was at INR4.54 crores as against INR3.90 crores same period PY.

 Royal Orchid Hotels has opened its new hotel, Regenta Resort in Bharatpur, Rajasthan taking total number of properties to 49 in 35 regions.

Outlook & Valuation

Asset light business model, rapid expansion of properties, favorable taxation structure under GST, turnaround in business operations combined with lower operational and finance expenses is a boost to the company. The company’s growth strategy is to expand via leased hotels in order to increase the topline and plans to have 75 properties by 2020. The management’s efforts to reorganize the Company’s debt are paying off. ROHL’s debt have gone from a five-year to 10-year repayment period.

Ongoing tourist season to be continued till end of FY19 along with ever increasing foreign tourist arrival and robust air passenger traffic bodes well for the company. We maintain our Target Price of INR207.