IHCL stock gains 2% after UBS revises target price with 19% upside

The brokerage firm has retained a ‘buy’ call for IHCL, estimating Ebitda to grow by 9 percent/18 percent ahead of consensus over FY25-26E

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Shares of Indian Hotels Company (IHCL) gained 2 percent to Rs 418 on November 20 after brokerage firm UBS raised the target price on the counter to Rs 500 per share from Rs 410, implying an upside of over 19 percent from current levels. The S&P BSE Sensex was down 133 points or 0.2 percent to 65,661 levels, as of 10:10am.

In the past three months, the stock of IHCL has surged 9 percent as against a percent rise in the benchmark Sensex. The IHCL scrip had earlier touched a 52-week high of Rs 436 on September 7.

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“The market appears sceptical about company’s average room revenue (ARR) rate and occupancy growth. However, upon analysis of upcoming launches in 8 key cities, we remain positive on overall market supply-demand balance. We remain affirmative that the company will continue to surprise on rooms, ARR and occupancy momentum,” UBS said.

The brokerage firm has retained a ‘buy’ call for IHCL, estimating the Ebitda to grow by 9 percent/18 percent ahead of consensus over FY25-26.

IHCL’s net profit surged 37 percent on-year to Rs 167 crore in the July-September quarter of the current financial year and total income jumped 18 percent, 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.

Going ahead, the management guided for double-digit revenue per available room (RevPAR) in the October-December quarter. Following the Q2 results, analysts at Motilal Oswal maintained a ‘buy’ call on IHCL, 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 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,” analysts of the brokerage house wrote.

Valuation-wise, the IHCL shares were trading at 53 times (x) price-to-earnings (PE) ratio, much lower than sector’s average of 83x PE multiple.

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