As the bears appeared to be establishing their grip, our benchmark indices have lost some points this week. Interestingly, despite no negative news, FIIs and DIIs have cut their holdings in the majority of companies that experienced a severe correction within the week. ICICI Direct is betting on the following three stocks, with the shares of TAJGVK Hotels having a potential upside of up to 40%.
Buy TAJGVK Hotels with upside potential of 40%
TAJGVK Hotels is a premium hotel company centered in Hyderabad, with 67 percent of revenues coming from the city (pre-Covid).
ICICI Direct sees gains of nearly 40% on the stock of TAJGVK Hotels and has set a target price of Rs 210, as against the current market price of Rs 150.
Reports first-ever profits post March 2020 quarter
According to brokerage, with a robust rebound in revenues and managed fixed expenses, the firm declared its first quarterly net profit of Rs 1.2 crore after Q4FY20 in Q2FY22. From H2FY22 onwards, we expect strong traction in premium sector hotel room revenues. Furthermore, the ongoing crisis may result in a 15% to 18% reduction in room inventory, which bodes favorably for the company in the long run. Over FY21-23E, we anticipate a robust 79.8% revenue CAGR. In FY23E, we estimate the company's business to recover to 94% of pre-Covid levels, with EBITDA exceeding pre-Covid levels. In FY23E, margins are expected to be over 26%, with the potential to rise to 30% or more.
Target and Valuation
"On a replacement basis, the stock is trading at EV/room of Rs 1 crore, at a significant discount to current replacement costs. We remain positive on the company and maintain our BUY rating Target Price & valuation: We value the company at Rs 210 i.e.18x FY23E EV/EBITDA," the brokerage has said.
Buy Indian Hotels with upside potential of 21%
Through owned/managed hotels throughout the United States, the United Kingdom, Africa, Sri Lanka, the United Arab Emirates, and the Maldives, Indian Hotels has a select presence in the luxury market.
Leisure rebounds; business travel to follow soon
ICICI Direct sees gains of nearly 21% on the stock of Indian Hotels and has set a target price of Rs 250, as against the current market price of Rs 206.
In Q2FY22, Indian hotels experienced a strong resurgence, with revenue reaching 72 percent of pre-Covid levels. Indian Hotels' revenues increased by 184 percent year on year and 111 percent quarter on quarter to Rs 8.4 crore in Q2FY22. EBITDA was Rs 72.8 crore, while the net loss was Rs 120.6 crore, compared to a loss of Rs 230 crore last year and a loss of Rs 277 crore the previous quarter.
Target and Valuation
"Along with the improved outlook, the company is also focusing on driving more efficiencies through cost optimization. We remain positive on the company and maintain our BUY rating Target Price and Valuation: We value IHCL at Rs 250 i.e.31x FY23E EV/EBITDA," the brokerage has said.
Buy IEX with upside potential of 19%
The Indian Energy Exchange (IEX) is the country's leading electrical exchange, facilitating electricity trade.
Sturdy revenues backed by high EBITDA margins
ICICI Direct sees gains of nearly 19% on the stock of the Indian Energy Exchange and has set a target price of Rs 910, as against the current market price of Rs 764.
The IEX announced strong results for Q2FY22.
At Rs 110.4 crore, revenue was up 55.6 percent year over year and 21.3 percent quarter over quarter. In Q2FY22, EBITDA was at Rs 95 crore, up 71.4 percent year on year, with margins at 86.1 percent. Consequent PAT wasRs 77.4 crore in Q2FY22, up 74.6 percent YoY and 24.6 percent QoQ.
Target and Valuation
"For the past year, IEX has remained richly valued given its clean balance sheet, near-monopoly and bright future prospects. We continue to remain positive and retain our BUY rating on the stock. Target Price and Valuation: We value IEX at Rs 910 i.e. 57x P/E on FY24E EPS," the brokerage has said.
The above stocks are picked from the brokerage report of ICICI Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.