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 yield a return of 15.85%, in the coming year. It is a large cap stock with a market capitalization of around Rs. 44,188 crores. Over the past month, this stock has jumped 12.44% on NSE.
|Stock market outlook|
|Current market price (CMP)||Rs.328|
|Potential return over 1 year||15.85%|
|Stock price at 52-week high||Rs.337.20|
|52 week low price||Rs.171|
Indian Hotels Company Ltd. (IHCL) recorded strong growth of 3.7x revenue on an annual basis and EBIDTA margins improved to 30% in the first quarter of FY2023. Domestic occupancy was 68% in Q1FY2023. Although Q2 was a tough quarter for business, occupancy is expected to remain close to Q1 levels due to strong demand for rooms in key domestic destinations. Sharekhan said, “Overall, we expect the company’s revenue to grow more than 70% in Q2FY2023. Consolidated EBIDTA margins are expected to be 27-28% from 16% in Q2FY2020 thanks to leveraged higher operating and cost reduction benefits initiative.”
Advantages of actions: Sharekhan
Sharekhan said: “We maintain our Buy recommendation on Indian Hotels Company (IHCL) with a revised price target of Rs. 380 (delaying it to September 2024 EV/EVBIDTA). scale in new ventures and lean balance make it a major player in the hospitality industry Sustained strong domestic demand for leisure travel and a likely recovery in foreign tourist arrivals (FTA) will lead to higher demand for rooms and near-term occupancy. Occupancy would remain close to Q1 levels in Q2 as well despite a lean season.”
“Demand for rooms is expected to exceed room supply over the next 2-3 years, which will help occupancy rates to remain high. The company has developed a robust growth plan to be achieved by the fiscal year 2025-26 with strong cash flow improvement and balance sheet strengthening with a focus on deleveraging,” he added.
Indian Hotels Company Ltd. – Growth forecasts for the second quarter
With domestic room demand remaining strong and ARR remaining above 60% on an annual basis, we expect strong growth in IHCL’s domestic business. IHCL International Hotels in major overseas destinations have seen a good recovery in demand with an overall improvement in international travel. The recent inflationary environment should not have a significant impact on RevPAR. So overall, we expect the company’s revenue to grow by more than 70% in Q2FY2023. Consolidated EBIDTA margins are expected to be 27-28% from 16% in Q2FY2020 thanks to higher operating leverage and the benefits of cost reduction initiatives, Sharekhan thinks.
IHCL and its subsidiaries bring together a group of brands and companies that offer a fusion of warm Indian hospitality and world-class service. Incorporated by Tata Group founder, Jamsetji Tata, the company opened its first hotel – Taj Mahal Palace, Bombay in 1903, and currently has 232 hotels (61 under development) worldwide in its portfolio, including a presence in India, North America, UK, Africa, Middle East, Malaysia, Sri Lanka, Maldives, Bhutan and Nepal.
India’s hospitality industry is growing more than 20% from pre-pandemic levels, driven by demand for rooms for domestic leisure travel, a recovery in demand from the meetings segment, travel motivation, conferences and exhibitions (MICE) and business trips and high demand for weddings and events. The recovery in foreign tourist arrivals (FTA) with the easing of travel restrictions will further boost demand for rooms during S2FY2023 and will also help room rentals to remain elevated.
The stock above was taken from Sharekhan’s brokerage report. Investing in stocks presents a risk of financial loss. Investors should therefore exercise caution. Greynium Information Technologies, the author, and the brokerage are not responsible for any losses caused as a result of decisions based on the article.