ITC shares at Rs 500, ITC Hotels stock at Rs 150-175? What analysts say

Shares ITC Ltd were trading marginally higher in Wednesday's trade as the demerger of ITC Hotels became effective today. All eyes are now on record date, January 6. ITC shareholders would be issued one share of ITC Hotels for every 10 shares of ITC they hold. Analysts largely see ITC Hotels to see a price discovery of Rs 150-175 per share upon listing. They have neutral to positive view on ITC shares.

ITC will directly hold 40 per cent stake in ITC Hotels while the rest 60 per cent stake will be held by ITC shareholders.

Systematix Shares and Stocks (India) noted that the hotels business makes up 4 per cent of ITC revenues, 3 per cent of its EBIT but 10 per cent of capital employed. It believes the demerger should improve ITC's ROCE from 40 per cent to 43 per cent. It noted that ITC Hotels will start with cash of Rs 1,500 crore (ITC at Rs 5,730 crore) and zero debt. It will invest 8-10 per cent of sales towards renovations, ongoing projects, new projects.

"ITC Hotels is India's 2nd-largest hotels entity with 140 properties (vs 232/23/112 for Indian Hotels, EIH, Lemon Tree). As per our proforma P&L, we estimate ITC Hotels' stock value at Rs 150 per share based on FY26E EV/Ebitda of 25 times," Systematix said.

This is the average valuation of players Indian Hotels, EIH such Lemon Tree.

Systematix estimates ITC stock price to adjust by Rs 5 per share as on the record date. "We currently maintain HOLD rating on ITC with target price of Rs 500, and will review our estimates post detailed disclosures by the company. Stock trades at P/E of 26 times/23 times FY26E/FY27E EPS," Systematix said.

Ahead of ITC demerger, Antique Stock Broking recommended 'Buy' on ITC on December 26, with a target price of Rs 563 based on FY27E estimates, implying a PE of 26 times.

On Wednesday, ITC was trading at Rs 484.95, up 0.27 per cent. Nuvama estimates ITC's share price to adjust by Rs 22-25, reflecting its 40 per cent stake in the hotel business and incorporating a 20 per cent holding discount.

According to Nuvama's FMCG team, led by Abneesh Roy, the adjustment is expected to be Rs 18 per share. "In addition, based on discussions with multiple market participants, we anticipate that the initial market price for ITC Hotels shares will range between Rs 150-175 per share," Nuvama said.

Narendra Solanki of Anand Rathi Shares and Stock Brokers finds ITC interesting. He said ITC’s packaged foods such as Ashirwad, Sunfeast, YiPPee! and Bingo!; and personal care products, continued gaining traction. With a solid balance sheet, no debt, and value from its hotel demerger, ITC is well positioned for profitability, he said.