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NEW DELHI: (IHCL), whose shares have climbed 23 per cent this year on faster-than-expected recovery in business, managed to impress Dalal Street with its realistic FY26 roadmap that it laid out at an analyst meet recently. Analysts said focus on hotel chain ‘Ginger’ has stepped up significantly and that the clarity on Sea Rock, especially in terms of capex plans, is offering comfort on capital allocation.

Net-net, a few brokerages tracking the counter expect 21-28 per cent upside on the stock in the next 12 months, following a 31 percentage points outperformance over the benchmark Sensex so far in 2022.

For Edelweiss, the key highlights from the analyst meet were the targeting of 300-plus hotels against 175 in FY22. Ebitda margin target of 33 per cent against pre-Covid level of 24 per cent in FY20 and estimation of share of new brands and management fees in Ebitda at 35 per cent were other key highlights, it said. Net debt target of zero stays,

noted adding that IHCL is targeting Rs 1,000 crore via non-core asset sales.

The management is looking at consistent double digit revenue growth and pursuing an asset light model of a 50:50 hotel mix between owned/leased and managed hotels.
said the the growth and margin targets are realistic as it estimates FY23 consolidated revenue to grow 56 per cent YoY to Rs 4,780 crore (107 per cent of FY20 levels) and FY24 revenue to grow 18 per cent YoY to Rs 5,650 crore at an Ebitda margin of 32 per cent. This brokerage has a target of Rs 292 on the stock .

Edelweiss is building a revenue of Rs 6,100 crore and Ebitda margin of 33 per cent in FY26. It has kept its price target unchanged at Rs 274 valuing it at 23 times FY24 EV/Ebitda against 20 times FY24 EV/Ebitda at prevailing levels.

Rakesh Jhunjhunwala and his wife Rekha held 2.12 per cent stake in Indian Hotels as of March 31, which was valued at Rs 680-odd crore as of Tuesday’s price of Rs 226.70 on BSE. The 23 per cent jump in the scrip year-to-date has been in contrast to a 8.5 per cent drop in the BSE Sensex during the same period.

Nirmal Bang said IHCL has consistently outperformed the industry during Covid-19 times in terms of revenue per available room (RevPAR) and its premium is expected to improve further compared to the industry. In April, amid strong demand for hotels, IHCL’s same store RevPAR came in significantly ahead of pre-Covid level, it noted, adding that the management is expecting travel to return to normal and even exceed pre-Covid levels.

“While increase in average room rate ARR and operating leverage can drive margins, IHCL is also building in a 3 per cent reduction (as percentage of sales) in corporate overheads, besides other cost rationalisation initiatives. While some of the existing properties could be a drag on return ratios, incremental capital allocation would be return ratio accretive. Simplification of the corporate structure and monetisation of non-core assets are other ongoing focus areas, which should continue to drive efficiencies and strengthen the balance sheet,” Nirmal Bang said.

observed that new businesses like Ginger, Qmin, amã, and the Chambers will generate incremental revenue, with higher Ebitda flow through, without deploying capital. It noted that around 74 per cent of projects under Indian Hotels’ pipeline are management contracts.

Like FY22, said this brokerage, a strong recovery in FY23 and FY24, led by an improvement in ARR once economic activity normalizes is likely. It also sees improved occupancies, cost rationalisation, increase in F&B income and higher income from management contracts.

Motilal Oswal sees the stock at Rs 278 while Edelweiss sees it worth Rs 274.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)


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