Tata Group Stock: Tata Group’s hotel company Indian Hotels is witnessing strong growth after overcoming the challenges of Covid 19. Brokerage house Motilal Oswal has advised investment in Indian Hotels in view of the strong outlook of the hotel business and has expressed an expectation of 30 per cent upside.
Rakesh Jhunjhunwala Stake In IHCL
Ace investor Rakesh Jhunjhunwala and his wife Rekha owned a total 2.12 per cent stake in the hotel as of March 31, which is valued at Rs 667 crore as of Thursday’s trade.
Brokerages Bullish As Businesses Grows Post Covid
Brokerage houses are bullish on Indian Hotels shares after the company highlighted its efforts to grow its existing and new businesses and deploy its capital efficiency to generate better returns in the FY22 annual report.
According to the report of the brokerage house, Motilal Oswal, the room income of Indian hotels has grown by 80 per cent year-on-year, with the average occupancy reaching 53 per cent (+14pp YoY). Whereas the ARR has a growth of 32 percent on a yearly basis. After the end of the third wave of coronavirus, the occupancy rate increased.
The food and beverage income of Indian Hotels has seen a growth of 78 per cent on a yearly basis. The banqueting business has doubled on a yearly basis, while the restaurant business has seen 50 per cent growth. Food and beverages revenue has come down to 65 per cent of the precovid level. The company’s other operating income has grown by 43 per cent year-on-year. Management and Reimbursable Fee has increased by 2.2 times to 198.60 crores on a year-on-year basis.
ICICI Securities has cut its target for the stock marginally to Rs 284 from 292. The two price targets suggest 29-31 per cent upside over Wednesday’s closing price of Rs 215.60.
The company’s FY22 annual report reiterates the company’s plans to execute its “AHVAAN 2025” strategy, which it announced in May.
The strategy essentially focuses on four key pillars including reaching a total of 300-plus hotels across the portfolio and clocking a consolidated Ebitda margin of 33 per cent by FY26 with 35 per cent Ebitda share from management contracts and new businesses. The company also wishes to achieve a 50:50 ratio between owned/leased and management contract room keys and is looking to retain a net cash balance sheet while pursuing its growth plans.
“The AHVAAN strategy is an extension of the company’s earlier Aspiration 2022 strategy which focused on asset light expansion and improvement in margins. We believe that the growth and margin targets set by the company management are realistic,” said ICICI Securities.
The brokerage estimates FY23 consolidated revenue to grow 54 per cent YoY to Rs 462 crore, which would be 104 per cent of FY20 level. It sees FY24 revenue to grow 18 per cent YoY to Rs 5,450 crore at an Ebitda margin of 32 per cent.
The company said it’s April and May revenues were 10 per cent higher than pre-Covid levels and with sustained pickup in business travel along with leisure, ICICI Securities expect FY23E revenue and FY24E revenue at 104 per cent and 122 per cent of pre-Covid ( FY20) levels, respectively.
On Thursday, the scrip rose 2.97 per cent to hit a high of Rs 221.60.
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