This Tata Group company which is into hospitality to benefit from the positive outlook on Travel and Tourism from Jefferies and maintained a Buy rating with an upside potential of 20 percent.
Price Movement
The Indian Hotels Company Limited’s stock in Thursday’s session touched a day’s low at Rs. 821.80 per share down by 2.3 percent. The stock reiterated from the day’s low and was trading at Rs. 821.80 per share which is 1.57 percent from the previous closing price of Rs. 834.95. The stock has delivered a return of around 79 percent in the past year and has outperformed the Nifty Index in the same period.
Brokerage Price Target
Jefferies, a reputed brokerage firm, has maintained a “Buy” Rating for the stock with a target price of Rs. 1,000 per share indicating an upside potential of 19.76 percent upside from Wednesday’s closing price.
Rational from the Brokerage Firm
The brokerage firm, Jefferies highlighted their optimism on the travel and tourism industry led by increasing income and living standards. Jefferies mentioned that despite higher industry pricing, growth remains strong, and post-COVID, the hotel room rates, and airfares have surged, but demand stays robust, indicating a structural upturn. India’s Hotel revenue per available room is expected to grow 7 to 8 percent CAGR in upcoming years after double-digit growth in the past two to three years.
The company remains not affected by the slowdown in other consumer segments. Their proven track record instills confidence in achieving the goals. With an industry-leading hotel pipeline and a focus on diversifying its top line, the company expects double-digit EBITDA/profit CAGR said Jefferies.
Business Segments
As per the recent September 2024 results, the company recognizes its revenue from Room Revenue which contributed around 52 percent, Food and Beverages contributed around 33.79 percent, Management fees contributed around 6 percent and the remaining 8.21 percent from other operating income.
Future Outlook
The company plans to spend around Rs. 5,000 crore over the next 5 years. Taj Cochin Airport – 112 keys by Q4FY25, Vivanta & Ginger, Ekta Nagar – 275 keys by H2FY26, Taj Hessischer Hof, Frankfurt – 134 keys by Q4FY26, Ginger MOPA – 300 keys by FY28 and Expansion at Taj Ganges, Varanasi & Taj Mahal, Lucknow – 200 keys.
Further, IHCL plans to increase their RoCE from the current 15 percent to over 20 percent by FY30 which is driven by Asset management initiatives in existing assets, increased share from capital-light business, brownfield expansions, and unlocking non-cash generating assets. They expect to increase their portfolio of more than 700 hotels from the current 350 hotels and even plan to double the revenues to more than 15,000 crore by 2030.
They plan to increase their new business share to 15 to 18 percent, traditional business to 60 to 65 percent, Re-imagined business to 12 to 14 percent, and Management fee by 7 to 10 percent as of FY30. IHCL plans to increase its share of capital-light inventory to 75 percent by FY30 from 60 percent in FY24.
Financial Performance
Their Q2FY25 results show revenue from operations of Rs. 1,826 crore which increased by 27.42 percent year on year, from Rs. 1,433 crore in Q2FY24 and an 18 percent increase from Rs. 1,550 crore in Q1FY25. Their net profit increased by 225 percent year on year, from Rs. 179 crores in Q2FY24 to Rs. 583 crores in Q2FY25. Quarterly, the profits were up by 124 percent from Rs. 260 crore.
The debt-to-equity ratio was 0.34 times slightly declining from 0.47 times in FY23. The RoE in FY24 stood at 13.69 percent improved from 12.81 percent a year ago. However, the RoCE stood at 15.92 percent which has improved from 13.63 percent in FY23.
Shareholding Pattern
As of September 2024, the shareholding pattern includes promoters holding a share of 38.12 percent stake in The Indian Hotels Company, Foreign Institutional Investors (FII) holding around 27.44 percent, Domestic Institutional investors (DII) standing at 18.67 percent, Government accounts for 0.14 percent and public holdings standing at 15.65 percent.
About the company
The Indian Hotels Company Limited (IHCL), part of the Tata Group, was founded in 1902 by Jamsetji Tata and is headquartered in Mumbai. Renowned for its luxurious hospitality, IHCL operates a diverse portfolio of over 263 hotels across 12 countries which includes iconic brands like Taj, SeleQtions, Vivanta, and Ginger.
Their business model focuses on delivering exceptional guest experiences through personalized service and sustainable practices. IHCL’s strategic plan, Ahvaan 2025, aims to expand its hotel portfolio to over 300 properties while improving profitability through innovative new businesses and management contracts, reinforcing its position as a leader in the hospitality industry. The company has around 360 hotels with 123 hotels in the pipeline as of December 2024.
Written by Santhosh S
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