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The Byke Hospitality Ltd Research Report - 16th Dec 2015

Hotels | Published on Sep 09th 2015


The Byke Hospitality Ltd (Byke) is an India based hospitality services company. The company operates under two business segments – 1) managing hotels and 2) room chartering. Investment Arguments Asset light business model: Byke has 11 properties as of now, of which, 9 properties are on a long term lease of over 10-15 years. In the last 5 to 6 years, the company has increased its number of rooms from 102 to 697 (as in 1QFY2016). Going forward, the company has strong expansion plans through the lease model, which will enable it to grow at a faster pace with minimal capex requirement. Expansion on the cards: Currently, the company operates 697 rooms, including both owned and leased, across 11 properties. The company is now planning to add 8 more properties, which would lead to an addition of ~450-500 rooms over the next two years. Such expansion would be based on the lease model (for 10-20 years), thus not requiring any significant capex. The company plans to increase the number of properties from 11 to 50 within 5 years, following the asset light expansion plan. Presence in vegetarian budget hotels (mid-size) segment: Byke has presence in the vegetarian budget hotel segment at popular leisure destinations such as Goa, Matheran, Jaipur, Manali, Shimla, Puri and Mumbai while it has plans to expand across other destinations like Kerala, Lonavala, Chandigarh, Mahabaleshwar etc. In our view, the vegetarian budget hotels at leisure destinations in domestic market is a huge opportunity. Also in absence of track records, non-branded (single hotel players) hotels face issues in running their businesses. Byke, a branded vegetarian budget hotel follows a differentiated market penetration strategy. It leases hotels and address the challenges on back of their management experience; strong track record, marketing and distribution network, which further leads to higher occupancy, thereby maximizing the company’s profitability. Strong growth in chartering business to drive overall revenue: Under the room chartering business Byke books third-party hotel rooms, mainly during peak seasons, at strategically identified cultural and religious destinations on bulk basis and lets them out to tourists. In the chartering segment, the company has a strong track record, with its revenue having grown by 3.5x (Rs90cr in FY2015) in the last three years. Going forward we expect strong growth momentum in this segment due to the huge industry size. Outlook and Valuation: Given the company’s proven track records and taking into consideration its strong expansion plans, we expect the company to report strong topline and bottom-line CAGR of ~28% and ~29% respectively, over FY2015-18E. Moreover, the company is asset light, has negligible debt, and has been posting healthy return ratios, which make its balance sheet all the more attractive. At the current market price, the stock trades at a P/E of 14.3x its FY2018E EPS. We initiate coverage on the stock with a Buy recommendation and target price of Rs181 (17x FY2018E EPS), indicating an upside of ~19% in the stock price from the present levels.

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CMP 153
Target Price 181
Investment Period12 Months

Stock Info

MCAP BSE (Rs in Cr)736.80
MCAP NSE (Rs in Cr)734.79
P/E (x)26.63
EPS (Rs.)6.90
BV (Rs.)30.22
Div Yield (%)0.54
FV (Rs.)10.00
P/BV (x)6.08
EV/Sales (x)3.21
EV/EBITDA (x)14.10

Shareholding Pattern (%)

Public & Others41.0
Grand Total100.0

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