Ventive Hospitality shares: Kotak initiates coverage, sets fair value at Rs 770

Kotak Institutional Equities has initiated coverage on Ventive Hospitality, assigning an ADD rating with a fair value of Rs 770. Ventive, a luxury hospitality owner, operates 2,036 keys across India and the Maldives, with an additional 367 keys expected to be commissioned by FY2028E. The firm also manages 3.4 million square feet of annuity assets in Pune, boasting 95 per cent occupancy rate, which ensures a steady earnings stream.

"We expect Ventive’s attributable Ebitda to increase at a CAGR of 25 per cent over FY2025-27 due to improving occupancy for extant assets. Concentration on select assets, seasonality of earnings and presence in foreign countries remain the key risks. Initiate with ADD rating and FV of Rs 770," Kotak commented.

Ventive's current trading multiple stands at 15.4 times EV/Ebitda (FY2027), with the hospitality business alone trading at 16.6 times.

Kotak expects a 6 per cent annual revenue growth, driven by improvements in average room rates (ARR) and a 600 basis point occupancy increase, particularly noting a 760 basis point improvement in the Maldives. Ventive's portfolio includes 11 operational hotels, focusing on luxury accommodations in both India and the Maldives, supported by the Panchshil Group and Blackstone.

Kotak has highlighted potential risks including asset concentration, earnings seasonality, and foreign operations. Despite these risks, the firm remains optimistic about Ventive's growth trajectory, projecting a sustainable 25% CAGR in attributable EBITDA from FY2025-27. This is attributed to improvements in occupancy and ARR, supported by RevPAR enhancements.

Beyond FY2027E, Kotak anticipates earnings growth will be further bolstered by the commissioning and stabilisation of the 367 keys under construction. "Beyond FY2027E, the earnings would be supported by the commissioning and stabilisation of the 367 under-construction keys—we expect a 9% EBITDA CAGR over FY2027-30E," Kotak stated.

Ventive's near-term earnings growth is expected to be driven by RevPAR improvements. The company is projected to report 15 per cent/20 per cent/25 per cent CAGRs in revenue, consolidated EBITDA, and attributable Ebitda respectively over FY2025-27E, with an expanding blended margin to 48 per cent.

The improved financial outlook is underpinned by a reduction in net debt to Rs 1,730 crore, equivalent to 1.7 times FY2026E attributable Ebitda, following a recent IPO. Limited capital expenditure of Rs 740 crore until FY2028 is expected to maintain debt at manageable levels.

Overall, Ventive's strategic focus on luxury assets and targeted growth in key regions are expected to sustain its competitive edge and drive growth in the upcoming years, with ongoing support from its strong financial backers.