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Mahindra Holidays May Gain Over 30% This Year, Kotak Securities Says

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Mahindra Holidays & Resorts India Ltd. is well-positioned to tap the underpenetrated but growing vacation industry, according to Kotak Securities.

The homegrown brokerage says the Mahindra group company will be able to beat competition backed by its robust business model, active management and brand image.

"Mahindra Holidays is the market leader in the vacation ownership business in India with over 20 years of track record and is operating, and free cash flows will help the company to grow by keeping its balance sheet debt free." - Kotak Securities Research Report

Kotak Securities initiated coverage on the stock with a ‘Buy’ rating and a 12-month price target of Rs 388, implying a potential upside of over 30 percent. The stock is down 13 percent so far this year.

The brokerage said the vacation ownership in India has strong potential to grow, keeping in mind under penetration, rising discretionary spending towards tour and leisure segment, etc.

“The recent corrective measures adopted by the company regarding its focus on adding the right quality members are expected to improve profitability along with moderation in receivables,” said the report.

The brokerage firm expects the company’s revenue, operating income and net profit to compound at 10 percent, 14 percent and 14 percent, respectively over financial year 2017-2020, supported by strong cash flows.

Mahindra Holidays trades at 24 times its estimated earnings per share for the coming year. The stock is 24 percent below the Bloomberg consensus one-year target price.

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