EIH gains as Q1 net profit grows 61 percent
On the morning of August 9, shares of EIH Limited demonstrated positive movement, trading slightly over 1 percent higher. This increase in share price was a response to the hospitality chain’s strong financial performance in the first quarter of the current financial year.
EIH Limited, known for its hotels operating under the Trident and Oberoi brands, reported a noteworthy 61 percent year-on-year (YoY) increase in net profit, reaching Rs 106 crore in the first quarter of the financial year.
In addition to the impressive growth in net profit, the company’s earnings before interest, taxes, depreciation, and amortization (EBITDA) also showed a substantial YoY increase of 53 percent, amounting to Rs 180 crore. This growth in EBITDA is an indicator of the company’s improved operating performance and profitability during the quarter.
Moreover, EIH Limited reported a strong YoY growth of 26.7 percent in its revenue, which reached Rs 522.6 crore in the same quarter. This significant increase in revenue highlights the company’s ability to attract customers and generate higher sales across its hospitality offerings.
In summary, EIH Limited’s impressive financial results for the first quarter of the financial year were marked by substantial growth in net profit, EBITDA, and revenue. These positive outcomes indicate the company’s successful strategies in attracting guests to its hotels under the Trident and Oberoi brands, ultimately leading to improved profitability and operational performance.
An April report from ICICI Securities highlighted several demand drivers that were anticipated to positively impact the hospitality industry in India during the second half of the fiscal year 2023-2024 (H2FY24). These drivers were expected to contribute to double-digit revenue per available room (RevPAR) growth for hotels:
1. G20 Summit: The hosting of the G20 Summit, an international forum for governments and central bank governors, could lead to increased demand for hotel accommodations, as attendees, delegates, and other participants would require lodging during the event.
2. Men’s Cricket ODI World Cup: The staging of the Men’s Cricket ODI (One Day International) World Cup can significantly boost hotel occupancy, particularly in the host cities, as cricket events tend to attract a large number of local and international fans.
3. Wedding Season: The wedding season is a traditional period of high demand for hospitality services, with a surge in bookings for wedding-related events and accommodations. This can contribute to increased occupancy rates for hotels.
4. International Tourist Arrivals: The recovery of international tourist arrivals to pre-Covid levels is a positive indicator for the hospitality industry. Increased international travel can lead to higher occupancy rates and greater overall demand for hotel rooms.
ICRA, a credit rating agency, also provided insights into the premium hotel segment’s performance outlook. The agency estimated that the pan-India premium hotel occupancy for the fiscal year 2023-2024 (FY24) was projected to be around 72 percent, an improvement from approximately 70 percent in the previous fiscal year. Additionally, the average room rates (ARRs) for premium hotels across the country were expected to range from Rs 6,000 to Rs 6,200 in FY2024.
These projections suggest a positive outlook for the hospitality industry in India, with anticipated growth in occupancy rates and average room rates. The factors mentioned above, such as significant events, recovering international tourism, and traditional demand drivers like wedding season, collectively contribute to the optimistic expectations for the sector’s performance in the second half of FY24.
In its July report, ICRA projected a substantial 13-15 percent revenue growth for the Indian hotel industry in the fiscal year 2023-2024 (FY2024). This growth estimation is contingent on the industry’s ability to continue its positive trajectory, taking into account potential external disruptions that could impact demand.
EIH Limited, the subject of the initial discussion, is a significant player in the Indian hospitality sector. The company owns and manages approximately 29 hotels, operating under well-known brands such as Oberoi, Trident, and Maidens. This diverse portfolio allows EIH Limited to cater to various market segments and provide a range of hospitality experiences.
As of 10:43 am, the stock of EIH Limited was trading on the National Stock Exchange (NSE) at a price of Rs 212.20. This indicated a 1.14 percent increase from the previous close, suggesting positive sentiment among investors in response to the company’s strong financial performance and the positive outlook for the Indian hotel industry.
ICRA’s revenue growth projection, EIH Limited’s extensive portfolio, and the positive movement in the stock price collectively underscore the optimism surrounding the hospitality industry’s recovery and growth potential in the fiscal year 2023-2024. However, it’s important to remain mindful of potential unforeseen disruptions that could impact the industry’s performance.
