Byke Hospitality: Buy for an potential upside ranging from ~109%

Ventura Securities | June 7, 2018, 4:36 p.m.

We expect occupancies to rise by 300 bps to 71% and ARRs to improve by 4.3% to INR 4390.9 despite a robust growth of 16.7% CAGR to 1359 units of room inventory by FY21. This is expected to buoy revenue growth of 22% CAGR to Rs 322.3 crore by FY21. Over the same period, we expect a strong growth in profitability to be maintained. EBIDTA and net earnings are expected to grow by 22.5% CAGR and 25% CAGR to INR 126.5 crore (+ 44bps in  EBIDTA margin to 39.2%) and INR 70.4 crore (+151bps in PAT margin to 22%) respectively. Given its asset light model, return ratios - RoE of 22.1% and ROCE of 33% are expected to remain elevated. We re-initiate coverage on Byke Hospitality (Byke) with a BUY recommendation and a Price Objective of Rs (target Adj P/E multiple of 20x) implying upside potential of ~109%. At the CMP of Rs168, the stock is trading at PE of 9.6x FY21E EPS and compares favorably with peers of similar size.

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