Up to 65% upside potential! Will this hospitality stock script a rebound after a 30% fall?

Brokerage firms continued to remain positive on SAMHI Hotels, which made its stock market debut around two years ago. Analysts tracking the counter believe that SAMHI Hotels is well-positioned for strong outperformance, supported by an expected pickup in growth in H2, consistent capacity additions, and renovation-led strengthening of average room rate (ARR).

SAMHI's portfolio is shifting toward premium segments, while steady reduction in net-debt/EBITDA strengthens the balance sheet. Besides that, sector tailwinds such as rising domestic travel, recovery in foreign arrivals and disciplined pricing along with expansion of non-metro markets shall also act as catalysts for the stock.

SAMHI has significant potential for outperformance from the current levels based on factors including likely pick-up in second half; consistent capacity addition provides growth visibility; renovation and rebranding to drive ARR growth; portfolio Mix shifting towards premium segments; balance sheet improving with consistent reduction in net debt/Ebitda; and attractive valuations, said YES Securities.

"We believe growth picked up in H2 along with consistent profitability and net debt reduction can aid material rerating for the stock. We pencil in revenue, EBitda and PAT CAGR of 13 per cent, 17 per cent and 54 per cent over FY25-28E. We value SAMHI at 15 times September 2027 EV/Ebitda and arrive at target price of Rs 300," it added with a 'buy' rating.

Shares of SAMHI Hotels jumped nearly 4.5 per cent to Rs 189.35 on Thursday, with its total market capitalization close to Rs 4,200 crore. The stock had settled at Rs 181.20 on Wednesday. It has corrected sharply over 30 per cent from its 52-week high at Rs 254.60, hit nearly four months ago.

While seasonal softness may temper short-term growth, hotel companies’ fundamentals remain strong, with rising domestic travel (both leisure and corporate), disciplined pricing, recovery in foreign tourist arrivals, strategic room additions coupled with favourable macros providing confidence in the industry’s long-term resilience, said ShareKhan in its recent note on Hotel stocks.

"The industry is also seeing a structural shift in supply, with aggressive room additions in non-metro destinations such as Navi Mumbai, Noida, Dehradun, Lucknow, and Udaipur, indicating the next phase of expansion for India’s hospitality industry," it added with a positive view and target price of Rs 247 on SAMHI Hotels.

Shares of SAMHI Hotels made its stock market debut in September 2023, as it raised a total of Rs 1,370 crore from investors by selling its shares at Rs 126 apeice. Its portfolio is diversified across upper upscale/upscale, upper midscale and midscale segments under various brands, including Renaissance, Sheraton, Hyatt Regency, Fairfield by Marriott and Holiday Inn Express,