Cash flow will be a challenge for the hospitality industry – Prestige Group

Update on the Indian Equity Market:

On Friday Nifty closed 1.9%higher at 9,490. Among the sectoral indices Auto (+3.7%), Media (+3.6%), and PVT Bank (+2.79%) closed higher. PSU Bank (-0.4%) was the only sector that closed lower.ZEEL (+9.6%), Eicher Motor (+7.3%) and L&T (+5.8%) closed on a positive note. Wipro (-0.9%), ITC (-0.6%) and CIPLA (-0.5%) were among the top losers.

Excerpts from an interview of MrZaid Sadiq,Executive Director, Prestigegroupwith ET Now:

• Before the crisis hit, the Indian hospitality industry along with tourism was one of the key segments driving the growth of the services sector in the Indian economy.
• The pandemic and lockdown has brought things to a standstill and the hospitality industry is taking stock and reinventing them to successfully revive the sector in the post Covid world.
• Speaking about the long term effect of Covid-19 on the industry he saidgiven the dynamic and the unprecedented nature of this global crisis, it is expected to witness the ripple effects of Covid-19 across socio-economic sectors for at least another year.
• There is a hope to begin the journey towards recovery by June 2020 – provided India manages to flatten the corona virus curve.
• Speaking about the post covid-19 strategy to garner business, he added thatthe pandemic is changing the world, and businesses that are able to come up with innovative solutions to offer the right customer experience will be in a position to seize the opportunity and accelerate the recovery journey.
• The company is working closely with domestic partners and collaboration will be the key strategy. It will focus on the home-grown business; the ideal revenue stream will be Food & Beverage, including catering.
• The focus on room business will be back after the economy stabilizes.
• Speaking about the government, he saidthe Indian government has done a remarkable job of combating the global outbreak, the exact trajectory of which is still unknown.
• The government should consider extending the option of delaying of loan repayment / EMIs to business entities and slashing GST rates as cash flow will be a challenge for hospitality industry.
• The Covid-19 pandemic has taught us the importance of business agility, disaster preparedness, collaboration and compassion. The company is finding innovative ways to cut costs, manage unknown risks and work with fewer resources.

Consensus Estimate: (Source: market screener and Investing.com websites)

• The closing price of Prestige Estate Projects was ₹ 145/- as of 28-May-2020.  It traded at 12.3x/ 10.75x the consensus Earnings per share estimate of ₹ 11.7/13.5 forFY21E/ FY22E respectively.
• The consensus average target price for Prestige Estate Projects is ₹ 318/- which implies a PE multiple of 23.5x on FY22E EPS of ₹ 13.5/-

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”