Is there Profit Room available in Hotel Sector…?

The most Haryali Sector in the last 1-2 Months or at least at this bull has been the Hotel & Tourism.
We are seeing Various News & Data Stating Tourist Inflow in Nepal Has been increasing and
It is believed that there is direct proportional Relation between tourist inflow and the hotel & tourism sector.

So Today We will dive into Data of Hotel & Tourism

1)Today’s Price Vs 1 Year Ago Price

• TRH has gained Most By 88% from its year-ago price, whereas
• CGH has been in the same range prior to a year ago price.
• SHL & OHL has seen an Upward of 63 & 33% respectively
  

2) Growth Analysis – Revenue & cost Data

• OHL: OHL experienced significant revenue growth of 145% but also faced high cost growth of 86%. 
• CGH demonstrated a moderate revenue growth rate of 42% and relatively efficient cost management with cost growth of 26%.
  
• TRH displayed substantial revenue growth of 117% but also experienced significant cost growth of 63%. 
• SHL: SHL achieved notable revenue growth of 103%, but its cost growth was relatively high at 76%.
  In conclusion, all four companies experienced revenue growth, with varying degrees of cost growth.
• A deeper analysis of profitability and efficiency metrics is crucial to gain a comprehensive understanding of their financial performance.

3) Analysis of Other Income , Interest Coverage Ratio , ROE, Revenue to Cost Ratio

• Interest coverage ratio: Measures a company’s ability to cover interest expenses with its earnings.
• Revenue to cost: Evaluates cost management effectiveness by comparing revenue to total costs.
• OI -Other Income :Other income should not be considered while calculating sustainable profit
  because it represents non-recurring or unpredictable sources of revenue that may not be sustainable in the long term.

The exclusion of non-recurring and non-operational other income from the calculation of profit can significantly impact the profitability of an entity,
potentially lowering it. Consequently, this reduction in profitability can subsequently affect financial metrics such as return on equity (ROE) and
price-to-earnings (PE) ratio, as they are influenced by the level of profitability. Including non-recurring and unrelated income in
profit calculations can create a distorted or inflated view of the company’s financial performance.

Revenue to cost: Evaluates cost management effectiveness by comparing revenue to total costs.
                                                                 Higher the better

Interest coverage ratio: Measures a company’s ability to cover interest expenses with its earnings.
Higher the better

ROE measures company profitability and efficiency in generating returns for shareholders, indicating how effectively equity is utilized.
Higher ROE implies better financial performance and potential for increased shareholder value.
Comparing ROE with industry peers is important for meaningful analysis.

My Point of View: The Hotel sector share’s TRH has gained above 80% where as OHL has gained over 30% the only stagnant growth is of CGH which is only about 3%,

The CGH is already trading in very very unrealistic valuation . It has PE of 130 where as TRH PE is 31 this PE is after taking impact of Other Income ( non core income)
if we remove Other Income the PE of all the hotel will be Above 50 which is too hot to enter & touch now.
We have already seen revenue  growth over 100% and as per various news and unofficial report a further 30-40%growth is expected even though the current
PE seems to high to get in as most of hotel except SHL has ROE below 10% after impact of other income.

which clearly states such high valuation is not digestible in my point of view such valuation will only be upheld only if companies grows over 15% with ROE over 15%
then only we can think is there any room of profit left in HOTEL SECTOR.

DO YOUR OWN ANALYIS ON BASIS OF ABOVE DATA TO TAKE BUY & SELL DECISION

(Disclaimer: The analysis and data provided above are for informational purposes only and should not be considered as financial advice or a recommendation to buy or sell any securities. While efforts have been made to ensure the accuracy of the information, there is a possibility of manual errors or inaccuracies in the data. Readers are advised to conduct their own research and consult with a qualified financial professional before making any investment decisions. The information provided is subject to change without notice, and no guarantees are made regarding the completeness, reliability, or suitability of the analysis. The user acknowledges that they are solely responsible for any investment decisions made based on the information provided.)