The Indian Hotels Company Limited is a Tata group international company and South Asia's largest hospitality-centered firm, with identities such as Taj, SeleQtions, Vivanta, The Gateway, Ginger, Expressions, and TajSATS among its vibrant labels. On the NSE, the company's shares rose from Rs 107.49 to Rs 242.65 (as of 31 Mar 2022, 9:48 IST), representing a multibagger return of 125.88 percent in a year. The stock has gained 31.92 percent year to date (YTD), while shareholders have received a 38.03 percent return in the previous six months. The stock has gained 21.73 percent in the last month and 9.12 percent in the previous five days. Sharekhan, a brokerage company, believes the stock has more potential upside and has given it a buy call rating with a target price of Rs. 286.
Sharekhan has said "The Indian hotel industry was hit by the COVID-19 pandemic over the last two fiscals, as various mobility restrictions hit foreign tourist arrivals, inter-state travel and occupancy rates for the hotel industry. As the pandemic-led restrictions were eased gradually, with a reduction in COVID-19 cases after every wave, Indian Hotels Company Ltd (IHCL) saw strong revival in room demand that helped room occupancies improve sequentially. This was largely led by strong revival in domestic tourism."
According to the brokerage "With a reduction in cases globally, a strong vaccination drive and most countries (including India) removing travel restrictions, the revival in global tourism will be stronger in FY2023. Thus we expect IHCL to clock robust numbers in FY2023 with revenues crossing pre-pandemic levels on the back of high domestic demand and an expected recovery in foreign tourist arrivals. The company is also focusing on strengthening balance sheet by reducing debt on books through equity issuance."
Buy for a target price of Rs. 286
The brokerage has claimed that "A strong recovery in domestic leisure travel would help IHCL post better performance in the medium term (Q4FY2022 performance would still be affected by emergence of third wave). Room demand is expected to remain ahead of room supply for next 2-3 years and will help occupancies to remain high. Strong focus on building an asset-light model, market share gains in key markets and recovery in the business environment will help IHCL to recover 100% of pre-COVID levels in FY2023 with strong growth in profitability."
"Further the company is focusing on strengthening its balance sheet through a sustained reduction in debt, which augurs well from a long-term perspective. The stock trades at 31.7x/23.2 its FY2023E/24E EV/EBITDA. We maintain a Buy recommendation on the stock with an unchanged price target of Rs. 286," highlighted Sharekhan.
"Any emergence of fourth COVID-19 wave in next four to five months or slow recovery in inbound and outbound tourism industry would act as a key risk to our earnings estimates," noted the brokerage as the key risk for the stock.
The stock has been picked from the brokerage report of Sharekhan. 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.