Result Update

August 22, 2012

Rating matrix
Rating Target Target Period Potential Upside : : : : Buy | 195 12-15 months 33%

Cox & Kings (CNKLIM)

| 147
WHATS CHANGED
PRICE TARGET....................................................................................................Unchanged
FY14E 1933.3 725.2 37.5 269.3 19.7

Key Financials
| crore Net sales EBITDA EBITDA Margin (%) Net Profit EPS (|) FY11 496.7 230.0 46.3 129.1 9.5 FY12 844.9 154.3 18.3 35.5 2.6 FY13E 1690.1 583.3 34.5 195.7 14.3

EPS (FY13E)............................................................................................................... | 14.3 EPS (FY14E)............................................................................................................... | 19.7 RATING...............................................................................................................Unchanged

Peak season of HBR drives topline

Cox & Kings (C&K) have incorporated HBRs peak season numbers (i.e. April-September period) into Q1FY13 numbers. This, in turn, led to robust revenue and PAT growth of 239% YoY and 284% YoY, respectively. C&K reported net revenues of | 532 crore vs. our estimated revenues of | 436.7 crore. The growth was mainly led by robust growth from the Indian operation (23% YoY growth) and sustained stable performance of the education division of HBR (40% of total revenues) leading to overall revenue growth of 8% YoY on a like-to-like basis. On the other hand, business of camping (14% of total revenues), HotelBreak and adventure divisions continued to get impacted due to a difficult operating environment in UK and other European regions. However, its impact on margins remained negligible due to improved margins of leisure division led by strong India business and stable margins in education division. With HBRs peak season, stable margins and exchange fluctuation gain of | 71 crore, the company reported robust PAT growth of over 283% YoY. Though revenue growth would moderate, going forward, due to increased scale of volumes from HBR, we see scope of expansion in margins and profitability due to long-term synergy with C&K and HBR once economic environment in UK and other European regions improves. Education division remains resilient, camping, adventure & Hotel Break divisions gets impacted due to tough operating environment in Europe The business of the education division (40% of revenue), a major contributor, continued to remain resilient and grew 9% YoY. The business of camping, adventure and HotelBreak have been affected due to difficult economic conditions in the UK & Netherlands and increase in local taxes in the key operational markets of France, Spain and Italy. To trim down debt, maintain BUY rating The company is raising nearly US$137.8 million (~| 750 crore) through minority stake sale in its wholly-owned subsidiary Prometheon Holdings (UK) Ltd. The fund will be mainly utilised to retire part debt from Prometheons book, which we believe would further improve its profitability, going forward. We have valued the stock on an SOTP (i.e. 8x FY14E EV/EBITDA) basis and maintained BUY rating taking into account the long-term synergy with HBR and Indias growth potential.
Exhibit 1: Financial Summary
(| Crore) Total Operating Income EBITDA EBITDA Margin (%) Depreciation Interest Reported PAT EPS (|) Q1FY13 532.0 239.7 45.1 48.4 91.6 146.8 9.7 Q1FY13E 436.6 178.3 40.8 43.3 87.4 64.6 4.7 Q1FY12 157.0 72.1 45.9 5.0 12.7 38.3 2.8 Q4FY12 260.8 20.4 7.8 14.5 85.6 -16.1 -1.2 YoY ( %) 238.8 232.3 867.8 622.9 283.5 245.9 QoQ ( %) 104.0 1076.8 232.6 7.0 LP LP

Valuation summary
PE (x) Target PE (x) EV to EBITDA (x) Price to book (x) RoNW (%) RoCE (%) FY11 15.6 20.6 8.2 1.7 10.7 10.3 FY12 56.5 75.0 30.6 1.7 3.0 2.0 FY13E 10.3 13.6 8.3 1.4 14.1 7.8 FY14E 7.5 9.9 6.8 1.2 16.2 10.3

Stock data
Mcap Debt (FY14E) Cash & Invest(FY14E) EV 52 week H/L Equity cap Face value MF Holding(%) FII Holding(%) | 2007 crore | 3706 crore | 1053 crore | 4937 crore | 248.5 /122.5 | 68.3 crore |5 8.4 17.4

Price movement
6,000 5,500 5,000 4,500 4,000 Aug-11 Nov-11 Feb-12 May-12 Nifty (L.H.S) Price (R.H.S) 150 250

200

100 Aug-12

Analysts name
Rashesh Shah rashes.shah@icicisecurities.com

-87 bps +3725 bps

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

India - growth remains intact The company reported robust revenue growth of 23% YoY to ~| 125 crore from Indian operations (in line with our estimates) although its contribution to consolidated revenues declined to ~19% from 30% in Q4FY12. The performance of the Europe division continued to remain subdued due to difficult economic conditions prevailing in the UK and Netherlands that affected the businesses of Adventure and HotelBreak divisions of Holiday Break (HBR). Rest of the world (RoW) business has also been impacted mainly due to lower business volumes from Japan in the wake of a subdued operating environment.
Exhibit 2: Geographical break-up of revenues from leisure division
300 250 200 |. crore 150 100 50 0 India Europe Q1FY12 RoW Q1FY13 Total +23% 102 125 90 88 +7% 30 32 -2% +10% 223 246

Revenues from the Indian business grew 23% YoY while revenues from Europe declined by 2% due to a difficult operating environment

Source: Company, ICICIdirect.com Research, Note: *includes Hotel break and Adventure division of HBR

Education division drives revenue growth for HBR While the growth of the leisure division was led by the strong performance from India, a sustained stable performance of the education division of HBR led to overall consolidated revenue growth of 8% to | 532 crore for the quarter. The growth in the education division remained marginally lower due to the early onset of Easter this year, However, this, in turn, led to shifting of several PGL and NST tours to March from April. On the other hand, the business of the camping division has been impacted by a slowdown in the UK and Netherlands and a rise in local taxes in other key operational markets of France, Spain and Italy. As a result, margins in this division have also declined by 100 bps to 41.1%.
Exhibit 3: Consolidated revenue break-up
300 250 | crore 200 150 100 50 0 Leisure Education Q1FY12 Q1FY13 Camping 76 73 223 246 194 211

Exhibit 4: Segmental margins

55.0 50.0 45.0 40.0 35.0 30.0 Q1FY12 Leisure Education Q1FY13 Camping 42.1 41.7 52.1 52.1 42.3 41.1

Source: Company, ICICIdirect.com, Research

Source: Company, ICICIdirect.com, Research

ICICI Securities Ltd | Retail Equity Research

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Exhibit 5: Consolidated performance

600
Consolidated revenues for the quarter grew 239% YoY due to HBR consolidation while standalone revenues grew 23% due to the robust performance of the India business

532

300 250 200 % 45.1 27.6

500 400 |. crore 300 200 100 0 Q1FY12 Q2FY12 Consolidated Revenue Q3FY12 Q4FY12 YoY growth Q1FY13 157 137 285 268

150 100 50 0

Source: Company, ICICIdirect.com Research

Exhibit 6: Margin trend (%)

60 50
Stable operating margins were mainly led by robust growth in the India business and the sustained performance of the educational division of HBR

48.0

52.0 45.5 32.3 35.6 29.1 21.3

40 (%) 30 20 10 0 Q1FY11 Q2FY11 20.5

45.9 39.8 24.2

20.0 8.0 2.7 Q4FY12 -6.2 Q1FY13

Q3FY11

Q4FY11

Q1FY12

Q2FY12

Q3FY12

-10

-2.7

EBITDA Margin.

PAT Margin

Source: Company, ICICIdirect.com Research

Minority stake sale in Prometheon Holdings to trim down debt After scaling up operation through major acquisition of HBR, the company is now aiming to trim down its debt. The current debt stands at | 3,706 crore and the company is planning to bring down its debt by | 5-600 crore every year through cash generated from business. In addition to this, the company is also raising US$137.8 million through stake sale of around 15-20% stake in Prometheon Holdings (a subsidiary company) to PE player Citi Venture Capital International (CVCI) to bring down its debt further. We believe this would further improve its profitability and return ratios, going forward.

ICICI Securities Ltd | Retail Equity Research

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Financial summary
Profit and loss statement
(| Crore) (Year-end March) Total operating Income Growth (%) Employee Expenses Advertisement expenses Rent Other expenses Total Operating Expenditure EBITDA Growth (%) Depreciation Interest Other Income PBT Others Total Tax PAT Growth (%) EPS (|) FY11 496.7 24.4 130 42 19 75 266.7 230.0 23.4 18.6 54.4 36.0 193.2 -1.5 62.6 129.1 NM 9.5 FY12E 844.9 70.1 390 104 35 162 690.7 154.3 -32.9 56.9 200.4 169.6 67.1 15.4 47.0 35.5 -72.5 2.6 FY13E 1,690.1 100.0 600 125 126 256 1,106.8 583.3 278.1 192.0 306.5 49.6 205.2 56.2 65.7 195.7 451.5 14.3 FY14E 1,933.3 14.4 605 221 196 185 1,208.1 725.2 24.3 201.3 289.5 73.4 307.8 63.1 101.6 269.3 37.6 19.7
(Year-end March) Profit after Tax Add: Depreciation (Inc)/dec in Current Assets Inc/(dec) in CL and Provisions CF from operating activities (Inc)/dec in Investments (Inc)/dec in Fixed Assets Goodwilll on cons Others CF from investing activities Issue/(Buy back) of Equity Inc/(dec) in loan funds Dividend paid & dividend tax Inc/(dec) in Sec. premium Others CF from financing activities Net Cash flow Opening Cash Closing Cash FY11 129.1 18.6 -223.5 91.8 16.0 -1.7 2.2 -40.7 0.0 -40.1 5.3 340.0 -8.6 284.8 -13.1 608.5 584.3 376.9 961.2 FY12E 35.5 56.9 -777.6 2,372.0 1,686.8 0.0 -1,963.0 -2,445.5 -60.4 -4,468.9 0.0 2,862.0 0.0 -50.0 0.0 2,812.0 29.9 961.2 991.1 FY13E 195.7 192.0 -584.2 271.1 74.6 0.0 0.0 -195.6 0.0 -195.6 0.0 -100.0 0.0 0.0 0.0 -100.0 -221.0 991.1 770.1

Cash flow statement

(| Crore) FY14E 269.3 201.3 -383.7 -135.5 -48.6 0.0 0.0 -45.6 0.0 -45.6 0.0 -200.0 0.0 0.0 0.0 -200.0 -294.2 770.1 475.9

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research

Balance sheet
(| Crore) (Year-end March) Liabilities Equity Capital Reserve and Surplus Total Shareholders funds Total Debt Def Tax Liability Total Liabilities Assets Gross Block Less: Acc Depreciation Net Block Capital WIP Total Fixed Assets Goodwill on Cons Investments Def Tax Assets Inventory Debtors Loans and Advances Cash Total Current Assets Total Current Liabilities Net Current Assets Misc Exp not W/f Application of Funds 184.1 81.9 102.1 64.1 166.2 217.5 211.2 1.2 8.6 414.2 382.5 961.2 1,766.5 303.1 1,463.4 1.7 2,061.2 2,163.2 138.9 2,024.3 48.0 2,072.3 2,663.0 276.0 1.2 20.1 752.3 810.5 991.1 2,574.0 2,675.1 -101.1 1.6 4,913.1 2,376.2 330.9 2,045.3 35.0 2,080.3 2,663.0 276.0 1.2 37.3 1,250.2 879.6 770.1 2,937.2 2,946.2 -8.9 1.7 5,013.2 2,426.2 532.2 1,894.0 35.0 1,929.0 2,663.0 276.0 1.2 28.4 1,430.1 1,092.4 475.9 3,026.7 2,810.7 216.0 1.7 5,086.9 68.3 1,139.5 1,207.7 844.3 9.1 2,061.2 68.3 1,125.0 1,193.2 3,706.3 13.5 4,913.1 68.3 1,320.7 1,388.9 3,606.3 17.9 5,013.2 68.3 1,590.0 1,658.2 3,406.3 22.3 5,086.9 FY11 FY12E FY13E FY14E

Key ratios
(Year-end March) Per share data (|) EPS Cash EPS BV DPS Operating Ratios (%) EBITDA Margin PBT / Total Operating income Asset Turnover Debtor days Creditor days Return Ratios (%) RoE RoCE RoIC Valuation Ratios (x) P/E EV / EBITDA EV / Net Sales Market Cap / Sales Price to Book Value Solvency Ratios Debt/EBITDA Debt / Equity Current Ratio Quick Ratio 3.7 0.7 5.8 2.7 24.0 3.1 1.0 0.6 6.2 2.6 1.0 0.7 4.7 2.1 1.1 0.9 15.6 8.2 3.8 4.0 1.7 56.5 30.6 5.6 2.4 1.7 10.3 8.3 2.9 1.2 1.4 7.5 6.8 2.6 1.0 1.2 10.7 10.3 16.2 3.0 2.0 2.3 14.1 7.8 16.9 16.2 10.3 18.0 46.3 26.0 0.3 1.2 1.9 18.3 4.2 0.2 1.1 1.2 34.5 11.6 0.3 1.4 1.3 37.5 13.9 0.4 1.4 1.4 9.5 10.8 88.5 1.0 2.6 6.8 87.4 0.0 14.3 28.4 101.7 0.0 19.7 34.5 121.5 0.0 FY11 FY12E FY13E FY14E

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

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Exhibit 7: Recommendation History

250 200 150 100 50 0 Aug-11 Oct-11 Nov-11 Jan-12 Price Feb-12 Apr-12 May-12 Jul-12 Aug-12

Target Price

Source: Company, ICICIdirect.com Research

Exhibit 8: Recent Releases

Date 30-Mar-12 18-May-12 Event Initiating coverage Q4F12 Result update CMP 156 143 Target Price 195 195 Rating BUY BUY

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

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RATING RATIONALE

ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction; Buy: >10%/15% for large caps/midcaps, respectively; Hold: Up to +/-10%; Sell: -10% or more; Pankaj Pandey Head Research ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No. 7, MIDC, Andheri (East) Mumbai 400 093 research@icicidirect.com ANALYST CERTIFICATION
We /I, Rashesh Shah CA, research analyst, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our personal views about any and all of the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Analysts aren't registered as research analysts by FINRA and might not be an associated person of the ICICI Securities Inc.

pankaj.pandey@icicisecurities.com

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