The asset light model, high EBITDA margins and expansion in the new revenue generating avenue, RoCE, augurs well for Indian Hotels. The recovery is expected to continue in FY23 and FY24.
Rakesh Jhunjhunwala Portfolio Stock: Overcoming the challenges of Kovid 19, Tata Group’s hotel company Indian Hotels is seeing strong growth. If there is an increase in room income, then the occupancy rate is also slowly reaching the precovid level. Better recovery is being seen in every segment on a yearly basis. Due to which the stock has given better returns this year even after the correction of the market. Brokerage house Motilal Oswal has advised investment in Indian Hotels in view of the strong outlook of hotel business and has expressed expectation of 30 percent upside. Market’s veteran investor Rakesh Jhunjhunwala also has a stake in the company.
High EBITDA Margin, Asset Light Model
Brokerage house Motilal Oswal says that the asset light model of Indian Hotels, high EBITDA margins and new revenue generating avenue, augurs well for expansion in RoCE. Like FY22, strong recovery is expected to continue in FY23 and FY24. The brokerage house says that once the business activity is normal, there will be a better improvement in ARR. The occupancy rate is increasing due to the business travelers and leisure segment. At the same time, the company will also get the benefit of cost realization effort and increase in F&B income. Higher income is also expected from management contract. The brokerage house has given investment advice in the stock with a target of Rs 278. In terms of current price of Rs 215, it can give 30 percent return.
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Growing company’s earnings
According to the report of the brokerage house, 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 corona virus, the occupancy rate has increased.
The Food and Beverages income of Indian Hotels has seen a growth of 78 percent on a yearly basis. The banqueting business has doubled on a yearly basis, while the restaurant business has seen 50 percent growth. Food and beverages revenue has come down to 65 percent 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.
16% return this year
This year, due to the correction in the market, there was weakness in about 80 percent of the shares in the broader market, while Indian Hotels has given positive returns. The company’s stock has got 16 percent return this year and the share price has increased from Rs 184 to Rs 215. Rakesh Jhunjhunwala has a 2.1 percent stake in Indian Hotels Company. The company has 30,016,965 shares in his portfolio.
(Disclaimer: Stock investment advice is given by the brokerage house. These are not the personal views of The Financial Express. Markets are risky, so take expert opinion before investing.)
