Kamat Hotels (India) Ltd (Rs 178)

The company which is a pioneer of the environmentally sensitive hotel brand ‘Ecotel’ in India & one of the fastest growing hotel companies in India with its revenues and net profits expected to grow at a CAGR of 42.2% and 63.2% respectively over FY07-FY10 from Rs 1.1 bn and Rs 205.8 mn in FY07 to Rs 3203.5 mn and Rs 869.23 mn in FY10E.

Kamat Hotels has ambitious expansion plans over the next 3 yrs to penetrate in Tier-II and Tier III cities which have a huge growth potential and it plans to quadruple its room

capacity from around 600 rooms at present to 2150 rooms by end FY10. The capex for these expansion plans is estimated to be Rs 3 bn which is being funded through its

recent FCCB of Rs 800 mn and rest by way of raising additional debt and internal accruals. The stock is trading at 3.6x its FY10E EPS of Rs 50.2. We recommend a ‘BUY’

with a one year price target of Rs 250, which is at a 37.3% upside from current levels.