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Elara Capital
Cox & Kings (Buy)
CMP: ₹248.45
Target: ₹425
Cox & Kings consolidated revenue (ex-camping business) jumped by 13 per cent y-o-y to ₹685.4 crore, primarily driven by the education segment, Meininger and Leisure India. The domestic business posted 15.5 per cent growth in Q2 on better volume. Education reported sales of 13 per cent to ₹225 crore; however, constant currency sales growth was 9 per cent y-o-y in Q2. PGL constant currency sales grew in the double digits y-o-y. The company is likely to add 712 beds in FY16 and 780 beds in FY18 in the PGL segment. Meininger reported 25 per cent sales growth to ₹120 crore on better occupancy (84.4 per cent in Q2FY16 vs 82 per cent in Q2FY15), an increase in average bed rates by 7 per cent to Europe 30.4/bed and lower agency commission. The company has received the planning approval for the Liddington extension while approvals for Brownfield expansion at three other UK centres, notably Marchants Hill, are pending. Management says education is likely to grow at a healthy pace on geographical & Brownfield expansion, higher occupancy and yield.
The company’s focus on expanding the education segment with an asset-light business model and an increased shift towards B2C in the leisure segment would drive growth. We expect it to generate free cash flow of ₹1,450 crore over FY16-17E.
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