A mid-cap company whose market value 38,080.91 Crore, Indian Hotels Company Limited operates in the consumer discretionary industry. Research analysts at brokerage companies are bullish on the stock after the firm released its mixed Q1FY23 results, taking the Rakesh Jhunjhunwala portfolio stock to a new high. The stock closed with a negative margin of 0.94% 268.10 per share on BSE today after reaching 52-week high 277.00 today. On BSE, stock hits 52-week low 128.93 as on August 23, 2021, and it is currently trading up 107% from the low at the current market price of 268.10. Motilal Oswal has issued a buy call for the shares of Indian Hotels with a target price of Rs 320. While ICICI Securities has set a target price for the share of 330, both forecasts will take the stock to a new high.
Indian hotels reported revenues in Q1FY23 1,293 crore which was 370 crore in Q1FY22, an increase of 249% year-on-year. Company Reported EBITDA 405 crore in Q1 FY 22-23 123 crore in Q1 FY21-22, a growth of 229% year-on-year. The company’s EBITDA margin reached 31.3% which is a record high since the first quarter of FY 2010-11. Company reported profit before tax (PBT) 231 crores in Q1FY23 as compared to 315 crore in Q1FY22 and the company’s Profit After Tax (PAT) reached As compared to 170 crores in Q1FY23 277 crore in Q1FY22. However, on QoQ basis, the company registered a jump of 129% in net profit from 74.19 crore in the quarter ended March 170 crore in the quarter ended June.
Research analysts at Motilal Oswal said, “IH’s asset-light model as well as new/renewed revenue generating avenues, coupled with higher EBITDA margins, bodes well for expansion in ROCE. Strong momentum will continue in 2013 and FY24, led by: a) improving ARR and occupancy due to favorable demand-supply dynamics; b) ongoing cost rationalization efforts; c) higher earnings from management contracts; and d) Unlocking value by launching new and innovative brands.”
Commenting on the future price performance of the stock, Motilal Oswal said in a note that “On the back of higher ARR and occupancy, outperforming expected performance from standalone and major subsidiaries such as Peem and Roots in 1QFY23, we are looking at our growth.” Increases FY23/FY24 EBITDA estimated at 22%/11%. We maintain our Buy rating with SoTP-based TP of INR320 per share.”
ICICI Securities said in a note that IHCL’s performance was well ahead of our estimates due to a sharp recovery in corporate demand. With a better approach, the company is also focusing on bringing in greater efficiency through cost optimization. We remain positive on the company and maintain our BUY rating. We value IHCL 330 i.e. 23x FY24E EV/EBITDA.”
Commenting on the stock’s future price performance, ICICI Securities highlighted the full opening of doors to Foreign Tourists (FTAs) from March 2022, to further boost the demand for leisure and commercial hotel rooms from FY13 onwards. So that, under Ahwaan 2025, the company plans to have 300+ hotel room portfolio with zero net debt position. IHCL aims to achieve 33%+ margin (35% for new businesses) through cost efficiency, with revenue CAGR of 32.2% expected during FY 22-24E. Business will fully recover to pre-covid levels while EBITDA will cross pre-covid levels in FY23E; Margins witnessed over 24% in FY24E, which has the potential to expand further by ~100 bps thereafter and highlights key developments to make the company net debt free in FY23E.
Brokerage firm Sharekhan said in a note that “Indian Hotels Company Limited (IHCL) registered a strong quarter in the post-pandemic era due to strong room demand in the domestic market especially from the domestic leisure travel segment and recovery in corporate travel. Of. IHCL’s revenue grew 3.67x to Rs. 1,266.1 crore (3 year CAGR of 7%). It is much better than our as well as road expectation of Rs. 1,145.0 crore and Rs. 1,173.0 crore. Occupancy and ARR at IHCL Domestic Hotels grew by 9% and 31% respectively as compared to Q1FY2020, while the industry growth was 4% and 16% respectively in Q1FY2020. IHCL’s domestic occupancy ratio stood at 68% in Q1FY2023 versus 62% in Q1FY2020, while the average room rent stood at Rs. 8,423 per room as compared to Rs. 6,438 per room in Q1FY2020. Major international destinations such as USA and St James Court, London registered revenue/EBITDA growth of 85%/123% and 111%/109% respectively. Ginger achieved an EBITDA margin of 41% (higher than base margin) and is PBT positive in the first quarter. Cumin, received Rs. 100 crore revenue mark within two years of inception. Ebitda margin improved to 29.8%. Ebitda remained at Rs. As against a loss of Rs 377.9 crore in Q1FY2023. 149 crore in Q1FY2022.”
“The demand for rooms is expected to outpace the supply of rooms for the next 2-3 years which will help in higher occupancy. The company has chalked out a robust growth plan by FY 2025-26 with a strong recovery in cash flow and strengthening of the balance sheet with a focus on improving cash flow. Decreased demand in domestic leisure travel as well as improvement in oncoming tourism will help it to deliver a strong performance in the coming quarters. The EBITDA margin will continue to improve in the coming years. Thus we maintain IHCL as one of our top choice in the hospitality sector. The stock trades at 26.1x/18.9x its FY2023E/24E EV/EBITDA. We maintain Buy Recommendation on the stock with a revised price target of Rs. 320,” said research analysts at broking firm Sharekhan.
As per the shareholding pattern of Indian Hotels available on BSE, ace investor Rakesh Jhunjhunwala holds 1,57,29,200 shares or 1.11% stake in the company, while his wife Rekha Jhunjhunwala holds 1,42,87,765 shares or 1.01 per cent in the company. share. Quarter ended June.
Disclaimer: The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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