ODI Cricket World Cup, G20 summit ahead: Where are Indian Hotels shares headed?

The Indian Hotels Company Ltd (IHCL) post its strong June quarter results said the forthcoming ODI World Cup, G20 summit and recovery in international tourist arrivals may continue to drive demand for the Tata Group firm. As per the company management, the occupancy and room rates seen in the June quarter indicates that RevPAR (revenue generated per available room) growth may remain healthy in the remainder of FY24. Various industry forecasts also suggest a double digit demand CAGR over FY23-26 against the supply CAGR of 4-5 per cent, which made the company management feels that ARR (average room rate) trajectory is headed upwards in the medium term.

Brokerages are excited. They have share price targets of up to Rs 440 on the stock , which suggests an up to 16 per cent potential upside on the stock over Friday’s trading price of Rs 388.55.

Indian Hotels logged a 31 per cent increase in net profit at Rs 222 crore for the June quarter compared with Rs 170 crore in the same quarter last year. Revenue for the quarter jumped 16 per cent to Rs 1,466.4 crore compared with Rs 1,2661.1 crore in the year-ago quarter. Ebitda margin stood at 28 per cent, which was lower than 29.9 per cent YoY.

"We expect the upcoming corporate travels and International tourists to add further growth to demand. Major events such as G20 and World Cricket in India would aid in the further growth of the industry," said Axis Securities as it upped target for the stock to Rs 450 from Rs 375 earlier.

IHCL said it signed 11 and opened 5 new hotels across all its brands in the June quarter. "With our vast footprint across 125+ locations we will leverage the buoyancy in India’s travel and tourism sector. The outlook for the upcoming quarters remains strong with pace of demand driven by domestic consumption momentum, global events, and revival of international arrivals," IHCL said.

ICICI Securities has upped its rating to 'Buy' from 'Add' as it builds in RevPAR growth of 10 per cent in FY24E and 6 per cent in FY25 and FY26 and similar increase in domestic subsidiaries such as Ginger, Benares and United hotels. With new room additions, it pegs 10 per cent revenue CAGR and 15 epr cent Ebitda CAGR over FY23-26 for Indian Hotels.

This brokerage has a target of Rs 443 on the stock.

"We expect the strong momentum to continue in FY24, led by: a further improvement in occupancy due to multiple large global events such as G20 and ICC Cricket Men’s World Cup in 2023; an increase in ARR due to better demand, upgrades in hotels and corporate rate hikes; higher income from management contracts; and value unlocking by scaling up reimagined and new brands," Motilal Oswal Securities. This brokerage values IHCL at Rs 443. 

Nuvama does not wish to assign premium valuation to the stock, for now. While RevPar momentum is impressive, it may not translate into earning upgrades or justify assigning further premium valuation to the 23 timers FY25E EV/Ebitda, it said saying IHCL is already trading at (20 times pre-covid average).  This brokerage finds the stock worth Rs 405.

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