Sharekhan Put 'Buy' Call To This Tata Group Stock For 33% Returns, Expects Strong Profitable Growth

Sharekan has recently published a research report on Indian Hotels Company Ltd (IHCL), where the brokerage has called investors to buy the shares of the company for a target price of Rs 286/share. The company is focusing on generating higher free cash flow, optimal capital allocation and monetisation of non-core assets to further strengthen its balance sheet in the coming years. Indian Hotels Company Ltd aims to become debt-free in 2-3 years.

Stock Outlook: Target Price, CMP, 52 Week & High, performance

The current market price of Indian Hotels Company Ltd is Rs 216.25/share, which opened at Rs 216/share. The has moved up around 6.48% in the last months, 59.58% in 1 year, 46.89% in 3 years, and 69.73% in 5 years. Data shows the stock has not performed in short term compared to the long term, particularly less than 1 year.

Coming to the Current Market Price, it is open at a good price tag, however, it slid initial hour. Currently, it is trading below Rs 94.89/share from its 52-week low levels of Rs 121.36/share. Whereas, it is trading at nearly Rs 189.3/share from its 52 week peak of Rs 268.95/share levels.
According to the CMP and the estimated Target price set by the brokerage, the stock could jump 33%.

Indian Hotels Company Ltd's performance recovered to 68% of pre-pandemic levels in FY2022 with strong month-on-month recovery in occupancies and average room rentals (ARRs) in the second half of the fiscal. The company outlined its ambition of achieving EBITDA margins of 33% (from 22% in FY2020) with consistent revenue growth and becoming cash positive with no debt on books by FY2026 led by its growth strategy - Ahavaan 2025.

Ahvaan 2025

Indian Hotels Company Ltd is targeting EBITDA margin of 33% in FY2026 from 21.7% in FY2020. This will be done through consistent growth in its existing domestic properties, 35% EBITDA coming from high margins businesses such as new ventures and management fees and mix of 50:50 hotel rooms between own and management contract. In FY2023, the focus will be largely on exceeding its revenues over FY2021-20, attaining market leadership in the domestic market and meaningful scale-up of new businesses. In FY2025 and FY2026, the company is focusing on becoming most profitable brand, having a healthy balance sheet with net cash positive and the highest growth & footprints in the domestic market.

Strong industry tailwinds to support growth

Room supply in Indian markets is expected to grow by 5% while demand is expected to grow by 6% over FY2020-26 with strong traction from domestic leisure business, an expected recovery in business and corporate travels (will help recovery in key metros). This will help RevPAR in the coming years. With strong levers in place Indian Hotels Company Ltd expects consistent improvement in the RevPar with occupancy ratio expected to improve to 70% by 2024 from 66% in FY2022 (average room rental to grow at CAGR of 14% over FY2022-24).

Strengthening the balance sheet with improved cash flows

With funds raised through right issue and QIP of Rs. 4000 crore, the company has repaid large chunk of debt and currently net cash positive at Rs. 106 crore. The company is focusing on generating higher free cash flow, optimal capital allocation and monetisation of non-core assets to further strengthen its balance sheet in the coming years.

Sharekhan Retain Buy with an unchanged Target Price of Rs. 286/shares

"Indian Hotels Company Ltd's management has charted a strong growth plan by FY2025-26 with strong improvement in cash flows and strengthening balance sheet with focus on becoming net cash Positive. Pent-up demand in the domestic leisure travel will help the company to achieve strong growth over the pre-pandemic level in the absence of the fourth wave. The EBITDA margins will consistently improve in the coming years. Thus, we maintain Indian Hotels Company Ltd as one of our top picks in the hospitality space. We maintain our Buy recommendation on the stock with an unchanged price target of Rs. 286. The stock is currently trading at of 33x/23x its FY2023E/24E EV/EBITDA," the brokerage has said.

According to the brokerage firm the risk, "Any emergence of a 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."

Indian Hotels Company Ltd

Indian Hotels Company Ltd (IHCL) is India's largest hotel chain and South Asia's largest hospitality company by market capitalization. The company operates under the brand of "Taj Hotels, Palaces and Resorts". The Indian Hotels Company Limited and its subsidiaries bring together a group of brands and businesses that offer a fusion of warm Indian hospitality and world-class service. These include Taj - the hallmark of iconic hospitality, SeleQtions, a named collection of hotels, Vivanta, sophisticated upscale hotels and Ginger which is revolutionizing the lean luxe segment. It is one of the leading chains of luxury hotels and resorts that have establishments in several countries across the world.

The company has a portfolio of 196 hotels including 40 under development globally across 4 continents, 12 countries and in over 80 locations.

Apart from its base in India, Indian Hotels Company also has its establishments in other countries like the U.S., Australia, Bhutan, Sri Lanka, Malaysia, Mauritius, Maldives, the U.K., and the MEA.

Disclaimer

The stock has been picked from the brokerage report of Sharekhan. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.