Fundamental Radar: 4 factors that can take IHCL to record highs in 2023

Indian Hotel, part of the hotels and resort space, could well surpass October 2022 highs and create history in the next 6-12 months on additions in the hotel portfolio, the revival of the tourism industry, and pricing power.

The stock hit a fresh record high of Rs 348 on 6 October 2022 but failed to hold on to the momentum. It bounced back after creating a base above Rs 300 levels.

Long-term investors can look to buy the stock now for a target of Rs 384, Anmol Das, Head of Research, TejiMandi recommends

Indian Hotels (IHCL) is the largest listed hotel chain company in India operating several luxury hotels across all metro cities and major tourist destinations in India.

IHCL operates the iconic Taj Group of Hotels, the Vivanta, and SeleQtions hotels, making up two-thirds of the total number of hotels in their portfolio.

Anmol Das, Head of Research, TejiMandi highlights 4 factors that makes Indian Hotels an attractive buy:

Hotel Pipeline:
As of 2nd quarter, it operates 182 hotels with more than 21K rooms across India and several other nations. IHCL has a pipeline of 65 more hotels with +8,300 plus rooms to be added in their portfolio in the next few years.

It has already opened 9 hotels in this fiscal year with around 800 rooms and will be seen continuously adding new hotels in its Portfolio.

Under their Ahvaan 2025 campaign, IHCL aims to add 300+ hotels in its Portfolio and achieve EBITDA Margins of 33%.

2023 good year for the hospitality sector:

2023 is expected to be very good for the entire Hospitality space with major events like ICC Cricket ODI World Cup, India’s G20 Presidency, etc, to be held in India.

Foreign tourist arrival has already touched 4.8 million for the month of Oct, which is just a tad below the monthly average of 5.8 million during Pre-pandemic era.

Pricing Power:
IHCL has shown its dominance and pricing power with domestic travelling already in full swing, increasing foreign tourist arrivals will make occupancy levels increase to even higher than current levels allowing the further potential of premium addition in Average Room rates.

Valuation:
Considering the entire Pipeline addition to its Hotels Portfolio in the next few years, the brand’s ability and market dominance in terms of pricing of luxury hotels ARR, and the expected revival of the tourism industry of India with foreign arrivals picking up gradually, TejiMandi value IHCL with a 25x EV/EBITDA for FY25E at a Target Price of Rs 384 per share.

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