Tata Group Hotel Stock Falls 5% Today Amid Sensex Crash, Buy With Rs. 380 Target Price: Sharekhan

Stock To Buy: Target Price

The Current Market Price (CMP) of Indian Hotels Company Ltd. is Rs. 328. Sharekhan has estimated a Target Price for the stock at Rs. 380. This stock has the potential to give a 15.85% return, in the upcoming 1 year. It is a large-cap stock with a market capitalization of around Rs. 44,188 crore. In the last 1 month this stock has surged by 12.44% on NSE.

Financials

Indian Hotels Company Ltd. (IHCL) posted strong growth of 3.7x in revenues on y-o-y basis and EBIDTA margins improved to 30% in Q1FY2023. The domestic occupancy ratio stood at 68% in Q1FY2023. Despite Q2 being a lean quarter for business, the occupancy ratio is expected to remain close to Q1 levels due to sturdy room demand in key domestic destinations. Sharekhan said, "Overall, we expect the company's revenues to grow by 70%+ in Q2FY2023. Consolidated EBIDTA margins are expected to be at 27-28% versus 16% in Q2FY2020 on the back of higher operating leverage and the benefits of cost saving initiatives."

Stock Advantages: Sharekhan

Sharekhan mentioned, "We retain our Buy recommendation on Indian Hotels Company (IHCL) with a revised price target of Rs. 380 (rolling it over to September 2024 EV/EVBIDTA). Strong industry tailwinds, scale-up in new ventures and lean balance sheet make it a strong play in the hospitality space. Sustained high domestic leisure travel demand and a likely pick-up in foreign tourist arrivals (FTAs) will drive up room demand and occupancies in the near term. Occupancy ratio would stay close to Q1 levels in Q2 as well despite being a lean season."

"Room demand is expected to exceed room supply for the next 2-3 years which will help occupancies to remain high. The company has charted a robust 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," it added.

Indian Hotels Company Ltd. - Q2 Growth expectations

With domestic room demand remaining strong and ARR staying upwards of 60% on y-o-y basis, we expect strong growth in IHCL's domestic business. IHCL international hotels in key foreign destinations have witnessed a good pickup in demand with an overall improvement in international travel. The recent inflationary environment is unlikely to have any material impact on the RevPAR. Thus, overall, we expect the company's revenues to grow by 70%+ in Q2FY2023. Consolidated EBIDTA margins are expected to be at 27-28% versus 16% in Q2FY2020 on the back of higher operating leverage and benefits of cost-saving initiatives, Sharekhan thinks.

Company Portfolio:

IHCL and its subsidiaries bring together a group of brands and businesses that offer a fusion of warm Indian hospitality and world-class service. Incorporated by the founder of the Tata Group, Jamsetji Tata, the company opened its first hotel - Taj Mahal Palace, in Bombay in 1903, and currently has 232 hotels (61 under development) globally in its portfolio, including presence in India, North America, UK, Africa, Middle East, Malaysia, Sri Lanka, Maldives, Bhutan, and Nepal.

Sectoral growth

The Indian hospitality industry is growing at over 20% versus pre-pandemic levels led by room demand for domestic leisure travel, a recovery in demand from the Meetings, Incentives, Conferences and Exhibitions (MICE) segment and business travel and high demand from weddings and events. Revival in the foreign tourist arrivals (FTAs) with easing of travel restrictions will further boost the room demand in H2FY2023 and will also help room rentals to remain high.

Disclaimer

The above stock was 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.