gladiator stocks -...

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Research Analysts

Nitin Kunte, CMT

[email protected]

Vinayak Parmar

[email protected]

Dharmesh Shah

[email protected]

Pabitro Mukherjee

[email protected]

Ninad Tamhanekar, CMT

[email protected]

Click here to know more…

Stock on the Move

Open Recommendations

Gladiator Stocks

April 4, 2018

Momentum Picks

Scrip Action

Mahindra CIE Buy

Duration: 3 Months

Scrip Action

KEC International Buy

Ipca Labs Buy

Godrej properties Buy

Duration: 1 month

Click here to know more…

New recommendations

Date Scrip I-Direct Code Buying Range Target Stoploss Upside (%)

3-Apr-18 Indian Hotels INDHOT 136.00-140.00 166.00 124.00 21.0

4-Apr-18 EIH Ltd EIHLTD 162.00-166.00 194.00 145.00 18.0

Open recommendations

Date Scrip Avg Rec Price Target Stoploss CMP Return till date (%)

9-Jan-18 Reliance Industries 935.00 1070.00 865.00 907.00 -3.0

23-Jan-18 VST Industries 3105.00 3840.00 2770.00 3,086.00 -0.6

23-Feb-18 Merck 1485.00 1750.00 1370.00 1,549.00 4.3

All the recommendations are in Cash segment

Time Frame: 6 Months

Time Frame: 6 Months

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Hotels Thematic: Time to check in…

April 4, 2018 ICICI Securities Ltd. | Retail Equity Research 2

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Source: Bloomberg, ICICIdirect.com Research

• During the past three years, the hotel industry has witnessed a visible demand improvement in pan-India

occupancy levels

• The robust growth in foreign tourist arrivals, limited new room additions along with an uptick in domestic

demand would be key structural positive growth drivers for the hotel sector in the long run. The October-

March period is considered to be a strong season for the sector that accounts for ~60-65% of overall

annual sales. The rise in occupancy levels supported by a healthy pick-up in demand (domestic +

international) is expected to lead to a rise in room rates (ARRs) and robust expansion in margins of all

established large hotel players in India, going forward, as 60% of total operating costs are fixed in nature

• On Technical charts, the stock prices have seen a decent correction after a strong up move in CY17 thereby

working out the excesses built in previous rally. The signs of buying demand at key support levels makes us

believe that the Hotel stocks are once again ready to resume next up leg and therefore offers favourable

risk-reward set up

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Indian Hotels (INDHOT) – Double bottom at key support…

• Indian Hotels owns leading luxury hospitality brand “Taj”, has

a global presence and is part of the Tata Group

• The share price has been resilient in the recent correction as

it traced out a consistent buying support near key support of

| 125, which culminated in a potential double bottom

formation. With investor sights on earnings visibility,

selective buying is favouring hotel stocks. Indian Hotels

stands out, especially, on relative strength rating. We believe

the technical set up favours a fresh entry in the stock ahead

of the next up move

• The share price surpassed its 2008 peak to register a fresh

lifetime high of | 161 in January 2018. A subsequent

correction from lifetime highs got anchored at the key

support of | 125 as it is the confluence of the following

technical parameters:

a) breakout level above July-August 2016 and May 2017 peaks

around | 125-130 range

b) 61.8% retracement of the previous up move (| 100-161)

Double bottom formation at | 125 during February and March

2018 makes it a key support, going forward

•Time wise, the stock has already taken 10 weeks to retrace

just 61.8% of the previous sixteen weeks up move (| 100 to

161). Shallow price wise correction and elongated time wise

consolidation highlights the robust price structure

•Among oscillators, the weekly 14 week’s RSI is sustaining

above the bull market support reading of 40. It has recently

rebounded taking support at a trend line of its own joining its

previous swing lows, thus, corroborating the positive bias

•Considering the robust price structure and above-mentioned

technical observations, we expect the stock to resume its

uptrend and head towards | 169 in the medium term as it is

the 123.6% external retracement of the recent decline (| 161-

125) at | 169 levels


Strategy Buy

Stock Data

Price performance last five years

Technical Outlook Weekly Bar Chart

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Source: Bloomberg, ICICIdirect.com Research

Weekly RSI is rebounding from a trendline support of its

own thus validates bullish bias in the stock

161

131129

Double bottom @ 125

- 61.8% retracement

- Previous breakout area

81

123.6% external

retracement @ 169

100

Buying range 136-140

Target 166

Stoploss 124

Potential upside 21%

Time Frame 6 Months

Market Capitalisation (| Cr.) 16530

Face Value (|) 1

52 Week High / Low 161/101

50/200 day EMA 136/121

3m Avg volume 334lacs

MF Holding(%) 13.05

FII Holding(%) 15.41

-2

103

-7 -16

28

-30

70

2013 2014 2015 2016 2017

% C

hange

Year

Recommended on i-click to gain at 14:31 hrs on

April 03, 2018

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Indian Hotels (INDHOT): Fundamental View

Indian Hotel (IHCL) is one of the largest hotel players in India with a total room portfolio of ~17,000 rooms. The company has added nearly

3400 rooms over the last five years at 4.6% CAGR during the same period. The company has a presence in India and international markets

with international market accounting for 40% of total consolidated revenues.

Domestic hotel segment key growth driver

The domestic hotel segment, which accounts for 60% of total revenues, has been witnessing some green shoots mainly led by a decline in

room supply and increase in demand. This is further validated by the fact that that demand growth (5.6% YoY) has outpaced supply

growth (3.2% YoY) in the domestic market during 9MFY18. Overall occupancy has also improved 2.3% YoY to 64% while the average

room rate (ARR) improved 1.7% YoY in 9MFY18. We expect occupancy levels to improve further due to a rise in spending by domestic

travellers. In addition, with improved tourism measures by the government, we expect the sector to witness a better growth trajectory and

healthy pricing in the next three to four years.

Divestment or turnaround in international subsidiary key trigger

On the other hand, the international segment continues to remain a dragger with low single digit EBITDA margin (5-6%) and negative

RoCE. However, in Q3FY18, the company’s international subsidiaries also witnessed a turnaround leading to a net profit of ~ | 15 crore vs.

| 88 lakh in Q3FY17. We believe this was mainly due to a divestment of the loss making Taj Boston and some cost rationalisation. We

believe the turnaround of subsidiaries in the US and UK remains a key attribute to improve the overall performance of the company.

Sale of non-core assets, operational turnaround strategy bodes well

The recent right issue of | 1,500 crore has enabled the company to reduce debt by ~ | 1,200 crore thereby lowering debt/equity to 0.5x

from 1.3x in FY17. Further, divestment of loss making international subsidiaries and sale of non-core assets (like ~100 residential

apartment, ITDC shares and 44 acres of Land) will remain a key trigger for long term. Further, with the upbeat domestic environment and

turnaround in the international segment, the company aims to improve its EBITDA margins to 25% by FY22E (from 17% in FY17). It plans

to achieve the same through revenue optimisation (by 3-4%) and cost minimisation (3-5% through rationalisation of payroll, fuel and

corporate overheads).

Valuation & Outlook

Q3FY18 saw healthy revenue growth mainly led by the better performance of the domestic segment. Going forward, we expect this

segment to continue to gain traction led by higher occupancy, limited capacity addition and rise in spending by domestic travellers. Also,

the company plans to add eight new hotels in India (having a total room of 704) through management contracts that will further boost the

topline. Further, divestment or turnaround of loss making international subsidiaries and reduction in debt remain key positive triggers for

the long term. The stock is trading at attractive valuation of ~| 2.2 crore/adjusted room leaving headroom for more appreciation.


Stock Data

Key metrics

Financial Highlights

Source: Bloomberg, ICICI Direct.com Research

FY16 FY17 FY18E FY19E

Net Sales 4023.0 4010.3 4060.1 4161.6

EBITDA 552.2 609.6 646.8 728.3

Net Profit* -231.1 -63.2 78.9 161.8

EPS -2.9 -0.6 0.7 1.4

Particular Amount

Market Cap | 16411 crore

Debt (FY18E) | 1965 crore

Cash (FY18E) | 190 crore

EV | 18186 crore

Equity capital | 118.9 crore

Face value | 1


PE (x) NA NA 207.9 101.4

EV to EBITDA (x) 36.0 31.6 27.9 24.8

Price to book (x) 4.3 5.4 4.1 4.0

RoNW (%) -9.0 -2.5 2.0 3.9

RoCE (%) 3.7 4.8 5.3 6.3

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EIH Ltd. (EIHLIM) – Base formation augurs well for next leg of up move

• EIH Ltd, under the aegis of The Oberoi Group, operates

hotels and cruisers in five countries under the luxury 'Oberoi'

and five-star 'Trident' brands. Oberoi Hotels & Resorts is

synonymous the world over with providing the right blend of

service, luxury and quiet efficiency

• The share price of EIH has been forming a higher peak higher

trough on the long term chart. In January 2018, the stock

recorded a breakout from upward sloping resistance trend

line backed by heavy volumes and recorded an all-time high

of | 232. Since then, the stock has undergone a secondary

phase of correction. Currently, it has approached its key

value area of | 155 and formed a higher high after 10 weeks

correction, assisting the weekly stochastic oscillator to work

off the overbought conditions. Thus, we believe the stock has

undergone a healthy corrective phase paving the way for the

next leg of the up move towards | 192

• Over the past 10 weeks, the stock has retraced 88% of the

earlier three week’s sharp up move (|146–232). A shallow

price correction with elongated time wise consolidation

highlights the strong price structure.

• We believe the recent throwback has approached its maturity

and is likely to resume its up trend as it is the confluence of:

a) The stock has been sustaining well above the gap area of

| 155-156 on January 8, 2018

b) Also the 52 week’s EMA is placed around | 150

• Among momentum oscillators, the weekly stochastic

oscillator witnessed a bullish crossover, indicating

acceleration of momentum

• The overall price structure makes us believe the stock has

confirmed the three year long consolidation breakout by

retesting it and is now well positioned to accelerate the

momentum, thereby providing opportunity to create fresh

long position in the range of | 158-162 from a medium-term

perspective for target of | 192 being 50% retracement level

of last leg of decline (| 232–156)


Strategy Buy

Stock Data

Price performance last five years

Technical Outlook Weekly Bar Chart

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156

143

Bullish crossover of Stochastic oscillator and strong volume

activity, indicates acceleration of momentum

232

The stock has re-tested the breakout of three

years long consolidation, auguring well for

next leg of up move

192

91

Buying range 162-166

Target 194

Stoploss 145

Potential upside 18%

Time Frame 6 Months

Market Capitalisation (| Cr.) 9465

Face Value (|) 2

52 Week High / Low 232/118

50/200 day EMA 177/151

3m Avg volume 67 lacs

MF Holding(%) 6.25

FII Holding(%) 4.03

-10

102

3 -27

53

-40

60

160

2013 2014 2015 2016 2017

% C

hange

Year

52 Week’s

EMA

Recommended on i-click to gain at 10:47 hrs on

April 04, 2018

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EIH Ltd (EIHLIM): Fundamental View

EIH (a hotel operator) has majority of its hotels in business destinations. Out of the company’s total room inventory of 4897, EIH owns

around 45% of rooms, of which, ~95% are at business locations.

Cyclical upturn in hotel sector

We expect a revival in the economy to drive hotel industry occupancy and realisation. Further, a slowdown in capacity addition coupled

with a rise in spending by domestic travellers is expected to further drive revenues over the next three to four years.

Robust expansion plans over next three years

EIH plans to open at least six new hotels consisting of ~893 rooms in the next three years. The company is almost debt free (debt/equity of

0.1x) and has healthy cash flow generation that would help EIH fund these expansion without creating additional burden on its balance

sheet.

Reopening of Delhi property bodes well

The Oberoi, New Delhi (one of its prime properties) has been closed for renovation from April 1, 2016. The hotel opened in January 2018.

We believe this will result in improved revenue growth in FY18E and FY19E. The hotel generated revenue of | 186.9 crore (contributed

13.7% of total revenues of the company).

Valuation & Outlook

Re-opening of the Delhi property and opening of six new hotels is expected to drive topline (CAGR of 15% in FY17-19E) and EBITDA

growth (CAGR of 29% in FY17-19E). Considering a portfolio of premium properties (majority are upscale luxury hotels with replacement

cost of ~ | 4-5 crore/room) and robust expansion plans, the stock is trading at attractive valuations of | 2.9 crore/room.


Stock Data

Key metrics

Financial Highlights


| Crore FY16 FY17 FY18E FY19E

Net Sales 1,660.9 1,528.7 1,635.7 2,028.2

EBITDA 344.5 261.1 311.0 436.1

Net Profit 131.1 106.1 104.5 172.9

EPS (Rs) 2.3 1.9 1.8 3.0

Particulars Amount

Market Capitalization | 9145 crore

Total Debt (FY17) | 383 crore

Cash and Investments (FY17) | 179 crore

EV | 9348 crore

52 week H/L 232/98

Equity capital 114.3

Face value | 2


P/E 69.8 86.2 87.5 52.9

EV / EBITDA 27.1 35.8 29.8 21.3

P/BV 3.3 3.3 3.2 3.1

RoNW 5.2 4.7 3.7 5.9

RoCE 7.5 6.4 5.0 8.0

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Follow up summary of Gladiator Stocks


Summary Performance - Recommendations till date

Total Recommendations 336 Open 3

Closed Recommendations 333 Yield on Positive recommendations 19.0%

Positive Recommendations 251 Yield on Negative recommendations -8.0%

Closed at cost 8

Strike Rate 77%

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Stock on the Move open recommendations

Back to Top

Date Scrip Name Strategy Recommendation Price Target Stoploss Time Frame

27-Feb-18 Mahindra CIE Automotive Buy 233-238 270.00 216.00 3 Month


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Momentum Picks open recommendations

Back to Top

Date Stock Strategy Recommendation Price Target Stoploss Time Frame

3-Apr-18 KEC International Buy 400.00-406.00 457.00 377.00 30 Days

26-Feb-18 Ipca Laboratories Buy 670.00-682.00 775.00 621.00 30 Days

13-Mar-18 Godrej Properties Buy 770.00-777.00 850.00 715.00 30 Days


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Price history of last three years of the short term recommendations


Indian Hotels EIH Ltd

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Notes......


• It is recommended to enter in a staggered manner within the prescribed range provided in the report

• Once the recommendation is executed, it is advisable to keep strict stop loss as provided in the

report on closing basis

• The recommendations are valid for six months and in case we intend to carry forward the position, it

will be communicated through separate mail

Trading portfolio allocation

• It is recommended to spread out the trading corpus in a proportionate manner between the various

technical research products

• Please avoid allocating the entire trading corpus to a single stock or a single product segment

• Within each product segment it is advisable to allocate equal amount to each recommendation

• For example: The ‘Daily Calls’ product carries 3 to 4 intraday recommendations. It is advisable to

allocate equal amount to each recommendation

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Recommended product wise trading portfolio allocation


Duration

Momentum Picks-

Intraday

10% 30-50% 2-3 Stocks 1-2% Intraday

Momentum Picks-

Positional

25% 8-10% 6-8 Per Month 5-8% 1 Month

Stocks on the move 25% 12-15% 6-8 Per Month 10-12% 3 Months

Gladiator Stocks 35% 15-20% 20-30% 6 Months

Cash 5%

-

100%

Number of Calls Return Objective

Product Product wise

allocation

Allocations

Max allocation

In 1 Stock

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Pankaj Pandey Head – Research [email protected]

ICICIdirect.com Research Desk,

ICICI Securities Limited,

1st Floor, Akruti Trade Centre,

Road No 7, MIDC,

Andheri (East)

Mumbai – 400 093

[email protected]


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We /I, Dharmesh Shah, Nitin Kunte, Ninad Tamhanekar, Pabitro Mukherjee, Vinayak Parmar Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our

views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.

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percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their relatives from maintaining a financial interest in the securities or derivatives of any

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The information and opinions in this section have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not

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particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this company, or in

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The research recommendations are based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. These research recommendations

and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. ICICI Securities will not treat recipients as

customers by virtue of their receiving these recommendations. Nothing in this section constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances.

The securities discussed and opinions expressed herein may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be

taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or

any other reason. ICICI Securities accepts no liabilities whatsoever for any loss or damage of any kind arising out of the use of these recommendations. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk

Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change

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ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months.

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ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its associates or its Analysts did not receive any compensation or other benefits from the

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It is confirmed that Dharmesh Shah, Nitin Kunte, Ninad Tamhanekar, Pabitro Mukherjee and Vinayak Parmar, Research Analysts giving these recommendations have not received any compensation from the companies mentioned herein in the preceding

twelve months.

Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions

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