Sharekhan Suggests A “Buy” On This Tata Group Stock

Brokerage firm Sharekhan has suggested a buy on Tata Group stock Indian Hotels, as the brokerage sees good upside potential.

Indian Hotels: Reports strong growth

According to Sharekhan, Indian Hotels Company posted one of its strongest quarter in the past several years with strong double digit revenue growth, strong expansion in the EBIDTA margins and profit crossing Rs. 300 crore (equivalent to FY2020 levels). Consolidated revenues grew by 52% y-o-y to Rs. 1685.8 crore with room revenues growing by 26% to Rs. 818 crore, food & beverages (F&B) revenues growing by 17% to Rs. 634 crore and management fees growing by 87% y-o-y to Rs. 119 crore.

EBIDTA margins expand

The occupancies at enterprise level stood flat at 68.0% (standalone occupancy rate at 72.1%), while Average room rentals grew by 29% to Rs. 10,565 crore (RevPar grew by 28%). "EBIDTA margins expanded by 647 bps y-o-y to 35.4% with standalone EBIDTA margins expanded by 615 bps to 41% and International business EBIDTA margins expanded to 22%. EBIDTA expanded by 1.9x to Rs. 597 crore. This along with lower interest cost led to 3.7x growth in the adjusted PAT to Rs. 352 crore. For 9MFY2023, consolidated revenues grew by 92% y-o-y to Rs. 4,184.5 crore and EBIDTA margins improved to 30.3% from 11.1% in 9MFY2022 and adjusted PAT stood at Rs. 639.4 crore. The company free cash flow of Rs. 387 crore in Q3FY2023 (net cash of Rs. 738 crore)," the brokerage has said.

Buy the stock of Indian Hotels with a price target of Rs 380

According to Sharekhan, the company has charted a strong growth plan to be achieved by FY2025-26 with strong improvement in cash flows and strengthening the balance sheet with a focus on becoming debt-free. "EBITDA margins will consistently improve in the coming years. Thus, we maintain IHCL as one of our top picks in the hospitality space. The stock has corrected by ~14% since its recent high and is trading at 24.7x/17.8x/14.7x its FY2023E/24E/25E EV/EBITDA. We maintain a Buy recommendation on the stock with an unchanged price target of Rs. 380," the brokerage has said.

The stock of Indian Hotels last traded at Rs 318 on the Bombay Stock Exchange.

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 consult with certified experts before making any investment decision.