Mahindra Holidays & Resorts India Ltd. share price target

Timeshare to long-term wealth creation

In our interaction, management of Mahindra Holidays & Resorts India Ltd (MHRIL) highlighted 1) plans to add ~1,000 rooms entailing a capex of ~Rs89bn over the next 4-5 years 2) pressure on member additions in FY21 due to COVID related stress ( ~15,000-18,000 members have been added each year...

We met the senior management team of Mahindra Holidays Resorts India Ltd. (MHRIL), Mr. Kavinder Singh (MD & CEO) and Ms. Akhila Balachandar (CFO) to discuss i) Changing landscape of domestic Travel & Tourism Industry ii) Future prospects of...

Mahindra Holidays & Resorts India Limited (MHRIL') is a leading player in the leisure hospitality industry. The company has well established vacation ownership business in India, and is the market leader in the business with over 2.35 lakh members and 55 resorts together with its material subsidiary Holiday Club Resorts(HCR). Mahindra Holidays has a bouquet of 88 resorts in Asia and Europe, making it the largest vacation ownership company outside the USA. Apart from providing quality rooms in the form of furnished apartments and cottages at resorts in unique and popular destinations, the company also offers its...

We recently met the management of Mahindra Holidays & Resorts India Ltd (MHRIL). The company is positive on growing its business through growth in membership base led by new inventory addition. The company is focused on adding right kind of members. Increased share of resort income would result...

Revenue declined 1% YoY on lower VO income (-7% YoY). Member additions (4,200 members) were lower due to management's plan to increase down payments and curb EMI tenure (Q218 onwards). Margin declined 300 bps YoY while PAT de-grew 11% YoY.

Q2FY18 revenue declined 6% YoY primarily on lower Vacation Ownership income (VO; 14% decline YoY). Member additions reduced due to management's plan to increase down-payments and curb the EMI tenure. This would ensure long term customer persistence while reducing member acquisition cost.

MHRLs on-ground initiatives are paying off, with membership growth at 10% YoY in Q1FY18. Revenue growth at 8% YoY was below estimates primarily due to a provision on expected credit loss according to IND AS.

Healthy Top Line Growth Backed by Improvement in New Members Addition and Occupancy: MHRIL on standalone basis, for Q4FY17 reported a good growth in top line but changes in accounting standards and one time provisions impacted the bottomlinegrowth. Topline increased by 26.3% and the bottomline increased by 4.5% to Rs. 3157 Mn and Rs. 318 Mn respectively.

Benefits of several on-ground initiatives are now visible in the member growth rate (9% YoY), resulting in revenue growth of ~26% YoY in Q4.Excluding a one time provision of ~Rs 200 mn for expected credit loss (aligning with IND AS), EBITDA growth would have been 34% YoY.

Good Set of Numbers on the Back of New Memberships: MHRIL reported a good performance in the latest reported quarter with toplineand bottomline YoY growth of 12.5%, 15.2% respectively. Growth in occupancy, addition of new members supported by new rooms led to this growth. The EBITDA margins contracted marginally on the back of increase in employee costs and sales & marketing expenses.

Buy MHRIL at Rs. 440 and add on Declines at Rs. 440 ? 395 for the targets of Rs. 545, 670.

Despite the challenging environment, membership growth sustained at 9% YoY (in-line) in Q3FY17 taking the total memberbase to 210k. Revenue grew 13% YoY on the back of ASF and resort income growing by 22% YoY and 17% YoY.

In Q2FY17, MHRIL reported a good performance with 10.0% growth in topline and 22.0% YoY growth in bottomline to Rs. 2581 Mn and Rs.328 mn respectively. EBITDA margins improved marginally by 51 bps to 24.7% on YoY basis. ASF (Annual Subscription Fees) income is up 22.2% to Rs. 550 mn from Rs. 448 mn on the back of increase in member base. Resort income continues to grow steadily; for the quarter-ended Sep, 2016, it stood at Rs.395 Mn, up 8.0% from Rs. 365 Mn same quarter a year ago.

Strong inventory to drive growth: The new inventory of 450-500 rooms across 4 projects to be added to the current inventory of 2879 rooms. Addition of room is more important strategy for the growth of the vacation membership business. The current inventory and new inventory in pipeline augment well for the growth of thecompany in the coming years.