Cox & Kings Ltd - Research Report


Private Client Research






Cox & Kings Ltd

Reco Price
Rs. 270
Price Target (1.5 - 2 Years)
Rs. 550


July 07, 2015
CNX Nifty




Reducing debt significantly in future will be re rating trigger for stock.

Large Player:
Cox & Kings (C&K) global presence and cyclical domestic travel business drives a strong revenue growth. Although C&K caters to niche segments, still the flexible nature of spends exposes them of global slowdown or adverse regional eventual impacts. With improving US economy and stable Japan going ahead expecting Eurozone to be flattish and India getting back on growth track, C&K will be on a firm footing from here on. Indian tourism sector is highly seasonal with Q1 and Q2 being the peaks for outbound travel due to summer vacations while Q3 and Q4 are strong seasons for inbound arrivals into India This helps the C&K to explore the core business benefits both domestically and internationally in systematic manner.

To reduce debt by Rs 1,500 crores by FY2016 which would significantly lower interest cost:
The key overhang for C&K is net debt of Rs 3780 crores on the consolidated books. However, the company plans to reduce the debt by about Rs 1,500 crores over the next two years through increased cashflows from Europe business. The exercise will both reduce the stress on the balance sheet and substantially lower the interest cost which will fuel the bottom line growth. Also company retired Rs 1130 crores of debt in last financial year which mainly was done by Rs 1000 crores of QIP issue in FY 2015 and sale of camping business.

Domestic Business performing well:
C&K has strong brand equity and is highly praised for its premium products and services for both the outbound and the inbound segment in the Indian market. However, the outbound business is its focus area. The company’s success in branding products has helped it to differentiate its products and services from those offered by its competitors. The emergence of inspirational workforce and their rising desire to enjoy holidays abroad, the increasing trend of business/educational tours abroad, a shift from the unorganized to an organised travel and tourism market and the availability of value-for-money products have aided C&K to achieve a strong operating performance with revenues and operating profit growing at a compounded annual growth rate (CAGR) of about 25% each over FY2010-15.

Common group buying to help better bargains:
Cox and Kings have grown organically as well as through several acquisitions in the recent past across various geographies and has acquired considerable customer base. In the last four years the company has acquired seven companies. Cox & Kings buys inventory through a common buying group. This result in bulk buying of inventory and with the growing business volumes C&K is expected to have better bargaining power while negotiating with its suppliers of air tickets, hotel accommodations, car rentals and ground handling services. This increased bargaining power should give Cox & Kings a competitive advantage with reduced cost of inventory and competitive pricing of its products.

Holiday break strategic acquisition:
The £312mn Holidaybreak acquisition represents a transformational step for Cox & Kings (C&K) providing both critical mass and scale in critical international regions. The complementary nature of the two businesses has diversified C&K’s revenue streams both on a product and geographical basis. This has helped company to get significant synergistic opportunities helping to drive revenues and margin growth on consolidated business.

Focus to increase reach geographically:
C&K is a global player with presence in 20 countries through subsidiaries, branch offices and representative offices as well as through global network of sales agents. Thus, without leveraging its balance sheet C&K can achieve growth in size and spread its reach through the franchise model. Franchises are expected to contribute 15-18% of total revenues in 2-3 yrs.

C&K well-positioned to benefit as organized players gain share:
The Indian tourism market is highly fragmented and the Top 5 players account for about 15% of total market share. However, over the years, the industry has witnessed gradual consolidation in favor of organized tour operators as small travel agents that have traditionally relied on airline commissions have got squeezed out as with airlines cutting commissions over the last few years. Large operators like C&K, which have multiple commission streams and make higher margins by offering complete travel packages, are gaining market share. Its retail presence is enhanced by its on-line presence that offers multiple tour options to customers, including the flexibiity for customers to design their own tour packages.

Stock Data

CMP (Rs)
Face value (Rs)
52 Week Range (Rs)
273.50 - 252.55
Market cap (Rs Crores)
Price To Book Value (x)
P/E Ratio (x)

One Year indexed Stock Performance

Cox & Kings LtdSensex
Cox & Kings Ltd
Performance (%)


(in %)

+91 22 6639 3000


Company Description

Cox & Kings Limited (C&K) is one of the largest & oldest Tours & Travel Company in India. It has operations in 20 countries around the world. It has significant operations in United Kingdom, Australia, Dubai, Japan and the United states. It offers a wide range of products and services for the travel and tourism industry through its broad distribution network and global reach, and provides comprehensive travel and tourism solutions for individuals and group leisure travellers.

Its core business is the sale of packages for leisure travel where two or more components of travel, such as flights, Hotels, car rentals, transfers and ground handling services, are bundled together in advance and sold to customers. C&K solutions include air and cruise ticketing services, hotel reservations services, in-transit arrangements, local sightseeing services, visa, passport and medical insurance assistance and other destination management services and travel related foreign exchange facilities. C&K’s business is organised under the following four service offerings: (i) Leisure Travel; (ii) Corporate Travel; (iii) Visa Processing; and (iv) Foreign Exchange.

Tourisim Industry

Tourism in India has registered significant growth in recent decades. The upward trend is expected to continue in coming years. Tourism is one of India’s largest net earners of foreign exchange and also one of the biggest employers. The World Travel and Tourism Council (WTTC) has identified India as one of its growth centres in the world in the coming decade. Focused marketing of tourism and branding of India as a high value destination, combined with the government’s policies aimed at strengthening tourism infrastructure have seen a healthy growth in domestic and foreign tourist arrivals in India.

According to the WTTC, India’s travel and tourism industry contributed USD79bn to India’s GDP in 2013, which is expected to surge as high as USD168bn in 2021. The domestic travel and tourism industry is expected to grow at 8.8% CAGR over the next 10 years. Further, the WTTC expects that, as a result of the strong growth rate in domestic travel and tourism over the next 10 years, the country will become one of the top 10 travel and tourism markets in the world in terms of the absolute market size. As the Indian economy continues to open up in an effort to integrate with the world economy, this brings in its wake transit travellers, business travellers and holiday seekers.

Profit & Loss Statement:- (Consolidated)
(Rs Crores)
  • Net Sales
  • Growth (%)
  • Total Expenditure
  • EBITDA Margin (%)
  • Other Income
  • Operating Profit
  • Interest
  • PBDT
  • Depreciation
  • Profit Before Taxation & Exceptional Items
  • Exceptional Income / Expenses
  • Profit Before Tax
  • Provision for Tax
  • Tax Rate (%)
  • Profit After Tax
  • Adjusted EPS
  • 837.94
  • -
  • -
  • 670.62
  • 167.32
  • 19.97
  • 166.03
  • 333.35
  • 184.29
  • 149.06
  • 49.13
  • 99.93
  • -31.18
  • 68.75
  • 41.76
  • 60.74
  • 26.99
  • 3.05
  • 1808.74
  • 115.86
  • -
  • 1090.69
  • 718.05
  • 39.70
  • 58.78
  • 776.83
  • 370.53
  • 406.30
  • 147.36
  • 258.94
  • -54.36
  • 204.58
  • 52.09
  • 25.46
  • 152.49
  • 18.20
  • 2307.59
  • 27.58
  • -
  • 1417.45
  • 890.14
  • 38.57
  • 263.52
  • 1153.66
  • 323.58
  • 830.08
  • 171.13
  • 658.95
  • -45.62
  • 613.33
  • 164.28
  • 26.78
  • 449.05
  • 28.07
  • 2569.09
  • 11.33
  • -
  • 1558.26
  • 1010.83
  • 39.35
  • 54.15
  • 1064.98
  • 324.35
  • 740.63
  • 198.31
  • 542.32
  • -308.66
  • 233.66
  • 143.26
  • 61.31
  • 90.40
  • 5.42
  • 2450.30
  • -4.62
  • -
  • 1540.00
  • 910.30
  • 37.15
  • 55.50
  • 965.80
  • 235.50
  • 730.30
  • 196.50
  • 533.80
  • 50.00
  • 483.80
  • 172.50
  • 35.66
  • 311.30
  • 18.66
  • 2725.50
  • 11.23
  • -
  • 1695.50
  • 1030.00
  • 37.79
  • 57.50
  • 1087.50
  • 210.50
  • 877.00
  • 180.50
  • 696.50
  • 50.00
  • 646.50
  • 230.50
  • 35.65
  • 416.00
  • 24.94
Source: Stockaxis Research, Company Data


Due to Rs 4780 crores debts on the book the company’s balance sheet is burdened. With Holiday break’s revenue picking up the company is expected to post good financials in next two years. Also with franchise model picking up the company is expecting to contribute 15 – 18% to total sales.

Hence due to improving financials company is expected to offload some part of debt in next two years which will be the biggest trigger for the stock. At the CMP of Rs 270 stock is trading is trading at 10.82x FY 2017E which is a steep discount to its European peers. We arrive at target price of Rs 550 which is at 22.05x to its FY 2017E earnings justifying fair valuation for the stock for long term horizon.



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