Indian Hotels gains 2% on healthy Q2 results; brokerages reiterate bullish stance

The Tata Group company’s net profit rose 37 percent on-year to Rs 167 crore in the July-September quarter and the total income was up 18 percent

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The Indian Hotels Company (IHCL) stock  gained 2.4 percent to Rs 383 per share on October 30 after the Tata group company clocked sixth consecutive strong quarterly performance. Analysts remain positive and expect the counter to continue the strong performance on growing demand and higher occupancy levels.

IHCL’s net profit rose 37 percent on-year to Rs 167 crore in the July-September quarter of the current financial year. Total income jumped 18 percent on-year, aided by strong growth in average room revenue (ARR) and better occupancies (up 610 basis points on-year).

One basis point is one-hundredth of a percentage point.

The stock has gained 17 percent this year against a 4 percent rise in the Sensex. The IHCL scrip touched the 52-week high of Rs 436 on September 7.

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Analysts at Motilal Oswal maintained a “buy” call on the counter with a target price of Rs 480 a share in anticipation of strong demand environment and ARR improvement.

“We expect the strong momentum to continue in FY24 driven by further improvement in occupancy led by favourable demand-supply dynamics and big global events such as ongoing ICC Cricket Men’s World Cup, increase in ARR due to better demand, upgrades in hotels and corporate rate hikes; and value unlocking by scaling up reimagined and new brand,” its analysts wrote in a post-result review.

The management has guided for double-digit revenue per available room (RevPAR) in the October-December quarter.

IHCL’s RevPAR growth has been strong, so far, in October 2023, and showing good demand visibility for November as well.

“The majority of growth in FY24 is structural (events like G20 and cricket world cup accounting for just 1-1.5 percent of total revenue). Accordingly, we expect FY25 to sustain growth on the back of a strong demand outlook, coupled with more such events,” the management added.

ALSO READ: Do Top Hotel Stocks in India Grow During Holidays?

Ginger Santacruz in Mumbai will open in the two or three weeks and the management has indicated that the hotel can touch the revenue mark of Rs 100-crore in the next three years, with ARR in range of Rs 6,500 to Rs 7,000.

Analysts at Emkay Research, too, have stuck to “buy” call on IHCL with a target price of Rs 455 apiece, adding that robust demand will aid consolidated revenue/Ebitda compounded annual growth rate (CAGR) of 13/16 percent over FY23-26E.

“We like IHCL’s diversified topline, operational efficiency and debt-free balance sheet. IHCL has a pipeline of 82 hotels, and is set to add around 11,000 rooms (~8,800 room-adds over FY24-26E). This will aid consolidated revenue/EBITDA CAGR over FY23-26E, amid margin expansion,” the brokerage firm said.

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