Update 2017: Delta Corp Target price and Expert analysis

In November 2017, I had published my stock price research report on Delta Corp. Since then there has been a massive interest in the stock, with 100s of emails and lot many questions asked on our website.

If you have not yet read our research report, I encourage you to check it out DELTA CORP; this is essential for your understanding as an investor.

Here is an update on Delta Corp based on 2017 financials.

On 30th May 2017, the company announced its Q4 Results and Annual Financial results for the year 2017. Using the November 2017 report as the base valuation lets see how the company has performed.

Some Key points:

  1. On 8th November 2017, the Indian economy underwent demonetization. This event had an impact on the operations of Delta Corp in Q3 and Q4. However, in our view, this is a one-time event.
  2. The company started casino operations in Sikkim, and a new Floatel casino in Goa named Deltin Caravela.
  3. The company has raised close to 500 crores via QIP at a price of 155 Rs per share. The funds will be used for expansion of online business and debt repayment.

Keeping the above three points in mind. Here is how the company perform in Q4 and the financial year 2017.

Quick Financial Analysis Update:

Revenue: Delta Corp registered a revenue of 459 Crores in 2017 compared to 382 crores in 2016, registering a growth of 20.2%. We had estimated growth in revenue of 23.48%. Gaming revenue grew by 22% from 329 to 405 crores.

If you take a look at Quarter (March 2017) on Quarter (December 2016) revenues, have grown by 5%. Showing recovery in business from the impact of demonisation.

Expected growth 23.48% vs. Actual Growth 22%.

The company has missed the mark because of the event of demonisation and should recover in coming years.

 

Expenses: The Total expenses for Delta Corp for 2017 were 361 crores as compared to 331 crores in 2016. This is an increase of 9%.

When we compare the growth in revenue at 22% to growth in expenses at 9%. It is in-line with our expectations as this has expanded the PBIT (Profit before Interest and Taxes)  margin to 32% in 2017 from 27.38%. This is due to high operating leverage as we had observed in our original stock report.

We expect this to grow further with the launch of online gaming and Daman casino to 50%.

One point to be noted in expenses is that there was a sharp increase in License Fees and Registration Charges from 17.7 crores in 2016 to 32.8 crores in 2017. This may be due to the launch of Sikkim and Caravela Casino. However, more explanation needs to be provided by the management on this which I assume will be there in the annual report.

The expenses, when compared QoQ increased by 2.7% from 89.4 crores (December 2017) to 91.9 crores ( March 2017)

Net profit: The Net profit rose from 35.5 crores in 2016 to 70.9 crores, an increase of 99.4%. This is in-line again due to our observation of high operating leverage. The EPS has grown from 1.66 in 2016 to 3.19 in 2017.

QoQ the net profit was at 11 crores (March 2017) vs. 9.6 crores in (December 2017), an increase of 13.8%.

Conclusion

In 2017, the growth has deviated to some extent from our original research report in 2016 on  Delta Corp. However this is mainly due one-time impact of demonisation. We still maintain an ACCUMULATE Rating on Delta Corp.

However with QIP and focus on growth the company should do well going ahead.

We still maintain an ACCUMULATE Rating on Delta Corp.

For more checkout our  stock recommendation report on Delta Corp here

Please feel free to ask any questions you may have in the discussion forum or the comments section below.

Comments 4

Leave a Reply

Your email address will not be published. Required fields are marked *