Tata Group Stock: Tata Group’s hotel business, Indian Hotels, is witnessing strong growth after overcoming the challenges of Covid 19. Real estate agency Motilal Oswal has advised investments in Indian Hotels in view of the strong prospects of the hotel industry and has expressed the expectation of 30 percent upside potential.
Rakesh Jhunjhunwala ring in IHCL
Ace investor Rakesh Jhunjhunwala and his wife Rekha owned a 2.12 percent aggregate stake in the hotel on March 31, which is valued at Rs 667 crore on Thursday.
Brokers turn bullish as businesses grow after Covid
Brokers are bullish on Indian Hotels stock after the company highlighted in its FY22 annual report its efforts to grow its existing and new businesses and use its capital efficiently to generate better returns.
According to the report from the brokerage, Motilal Oswal, the room income of Indian hotels has increased by 80 percent year-over-year, with an average occupancy of 53 percent (+14pp YoY). While the ARR has an annual growth of 32 percent. After the end of the third wave of the coronavirus, the occupancy rate has increased.
Indian Hotels’ food and beverage revenues grew 78 percent year-on-year. The confectionery business has doubled year on year, while the restaurant business has grown by 50 percent. Food and beverage revenues have fallen to 65 percent of precovid levels. The company’s other operating income grew 43 percent year-over-year. The management and refundable fee has been increased 2.2 times to 198.60 crores on an annual basis.
ICICI Securities has marginally lowered its price target for the stock from 292 to Rs 284. The two target prices suggest an increase of 29-31 percent from Wednesday’s closing price of Rs 215.60.
The company’s FY22 annual report reiterates the company’s plans to execute on its “AHVAAN 2025” strategy, which it announced in May.
The strategy is essentially focused on four key pillars, including reaching a total of more than 300 hotels in the portfolio and achieving a consolidated EBITDA margin of 33 percent in FY26 with 35 percent EBITDA share from management contracts and new businesses . The company also aims to achieve a 50:50 ratio of ownership/rental to management contract room keys and maintains a net cash balance as it pursues its growth plans.
“The AHVAAN strategy is an extension of the company’s previous Aspiration 2022 strategy, which focused on slight asset expansion and margin improvement. We believe that the growth and margin targets set by the company’s management are realistic,” said ICICI Securities.
The brokerage estimates that consolidated sales will grow 54 percent year-on-year to Rs 462 crore in FY23, which would be 104 percent of the FY20 level. It sees sales grow 18 percent year-on-year to Rs 5,450 crore in FY24 with an Ebitda margin of 32 percent.
The company said revenues in April and May were 10 percent above pre-Covid levels and with continued increases in business travel and leisure, ICICI Securities expects FY23E revenue and FY24E revenue at 104 percent and 122 percent of pre-Covid (FY20) levels, respectively.
On Thursday, the scrip rose 2.97 percent, reaching a high of Rs 221.60.
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