Top 2 Hotel Stocks To Buy As Suggested By ICICI Securities

ICICI Securities, a domestic brokerage company, has placed a buy call on Indian Hotels Co. Ltd and Lemon Tree Hotels. According to the brokerage, "Heading into FY23, the beleaguered hospitality sector, which has borne the brunt of multiple Covid waves impacting business, is seeing a confluence of positives with leisure demand remaining strong and business travel set to see a strong leg up with reopening of offices, resumption of international flights and events/conferences also seeing a pick up. According to the India Hospitality Industry Overview 2021 by HVS Anarock, industry level occupancies are expected to touch pre-Covid levels of 66% sometime in CY22E/FY23E and reach 70% in CY24E. We reiterate our BUY rating on Indian Hotels Co. Ltd. (IHCL) and Lemon Tree Hotels (LTH)."

The brokerage has claimed "We reiterate our BUY ratings on Indian Hotels Co. Ltd. (IHCL) and Lemon Tree Hotels (LTH). For IHCL, we have revised our SoTP-based target price to Rs285/share (earlier Rs237), valuing the stock at 22x Mar'24E EV/EBITDA vs. 21x earlier which factors in the recent QIP fund raise. For LTH, we increase our FY23-24E revenue/EBITDA estimates by 7% and 9% respectively and maintain our BUY rating with a revised SoTP-based target price of Rs80/share (earlier Rs72/share) at an unchanged EV/EBITDA multiple of 20x on Mar'24E EV/EBITDA."

For Indian Hotels Company, the brokerage hasset a target price of Rs. 285 per share and has highlighted that "We reiterate our BUY rating on Indian Hotels Co Ltd. (IHCL) with a revised SoTPbased target price of Rs285/share (earlier Rs237), valuing the stock on 22x Mar'24E EV/EBITDA vs. 21x earlier which factors in the recent QIP fund raise. We believe IHCL is well poised to benefit from the expected recovery in the hotel business cycle from H1FY23 (Apr'22) and are enthused by the company's efforts to leverage its existing brand equity to focus on new business segments, focus on cost optimisation, asset-light management contract model to expand room portfolio, and debt free balance sheet post Rs40bn of equity fund raise through a rights and QIP issue in H2FY22. Key risks to our rating are fresh Covid waves globally and in India impacting demand and rise in operating costs denting margins."

For Lemon Tree Hotels, ICICI Securities has set a target price of Rs 80 per share and has said in a note that "Lemon Tree Hotels' (LTH) Q3FY22 results reflect clear signs of recovery in room occupancy and rates as revenues increased 110% YoY with occupancies up 1,520bps YoY to 57.6% and ADRs increasing 54% YoY to Rs3,901 owing to reduced Covid impact. As per company management, while Omicron impact has led to Jan'22 revenues declining by 40-45% MoM, things are again stabilising from Feb'22 with ADRs of Rs4,000+. Q3FY22 EBITDA margins of 44% surprised positively and may trend to ~50% levels once pre-Covid revenue levels return. We increase our FY23-24E revenue/EBITDA estimates by 7% and 9% respectively owing to higher than-expected demand recovery. We maintain our BUY rating with a revised SoTPbased target price of Rs80/share (earlier Rs72/share) at an unchanged EV/EBITDA multiple of 20x on Mar'24E EV/EBITDA. Key risks are a fresh Covid wave and rise in input/operating costs."