gladiator stocks -...
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Research Analysts
Nitin Kunte, CMT
Vinayak Parmar
Dharmesh Shah
Pabitro Mukherjee
Ninad Tamhanekar, CMT
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
GLA
DIA
TO
R S
TO
CK
S
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
April 4, 2018 ICICI Securities Ltd. | Retail Equity Research 3
Strategy Buy
Stock Data
Price performance last five years
Technical Outlook Weekly Bar Chart
GLA
DIA
TO
R S
TO
CK
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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
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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.
April 4, 2018 ICICI Securities Ltd. | Retail Equity Research 4
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
FY16 FY17 FY18E FY19E
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)
April 4, 2018 ICICI Securities Ltd. | Retail Equity Research 5
Strategy Buy
Stock Data
Price performance last five years
Technical Outlook Weekly Bar Chart
GLA
DIA
TO
R S
TO
CK
S
Source: Bloomberg, ICICI Direct.com Research
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
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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.
April 4, 2018 ICICI Securities Ltd. | Retail Equity Research 6
Stock Data
Key metrics
Financial Highlights
Source: Bloomberg, ICICI Direct.com Research
| 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
FY16 FY17 FY18E FY19E
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
April 4, 2018 ICICI Securities Ltd. | Retail Equity Research 7
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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April 4, 2018 ICICI Securities Ltd. | Retail Equity Research 8
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
All the recommendations are in Cash segment
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April 4, 2018 ICICI Securities Ltd. | Retail Equity Research 9
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
All the recommendations are in Cash segment
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Price history of last three years of the short term recommendations
April 4, 2018 ICICI Securities Ltd. | Retail Equity Research 10
Indian Hotels EIH Ltd
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Notes......
April 4, 2018 ICICI Securities Ltd. | Retail Equity Research 11
• 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
April 4, 2018 ICICI Securities Ltd. | Retail Equity Research 12
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
April 4, 2018 ICICI Securities Ltd. | Retail Equity Research 13
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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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April 4, 2018 ICICI Securities Ltd. | Retail Equity Research 14
Disclaimer