Share price of Rakesh Jhunjhunwala portfolio stock Indian Hotels Company (IHCL) soared 5% to a high of Rs 249.60 on Thursday, a day after the Tata group hospitality firm reported a consolidated net profit of Rs 71.57 crore in the fourth quarter ended March 31, 2022. The company had posted a consolidated net loss of Rs 97.72 crore in the same period previous fiscal. The hotel chain reported revenue from operations of Rs 872 crore in Q4FY22 compared with Rs 615 crore in the corresponding period of the previous fiscal. Rakesh Jhunjhunwala held 1.57 crore shares (1.11% stake), while his wife Rekha held 1.42 crore shares (1.01%) stake till quarter ended March 31, 2022.
India Hotels Co. share price jumps 124% in one-year despite Covid-19 impact
IHCL share price has surged 34% so far this year and over 124% in the last one year. Brokerages remain bullish on the stock and see up to 24% potential rally going forward on account of strong recovery in FY23 and FY24. Santosh Meena, Head of Research, Swastika Investmart said, “IHCL’s Q4 FY22 results were significantly below street expectations. The hotel industry is one of the best ways to play the post covid trade opening up the theme, demand is expected to exceed supply due to good recovery in both leisure and business travel. However, inflationary headwinds and the normalization of fixed costs will put pressure on the margins of the industry. Being the industry leader and tailwinds for the overall industry, the street is extremely optimistic about the company. The long-term outlook is bullish for the hotel industry and Indian hotels will remain our preferred bet despite short-term challenges.”
Should you buy, hold or sell IHCL shares?
Motilal Oswal: Buy
Target price: Rs 278
According to analysts at Motilal Oswal Financial Services, IHCL’s asset-light model as well as new and reimagined revenue-generating avenues, with higher EBITDA margin, bodes well for RoCE expansion. “Like FY22, we anticipate a strong recovery in FY23 and FY24 on improvement in ARR once the economic activity normalizes; improved occupancies, led by business travel as well as the Leisure segment; cost rationalization efforts; increase in F&B income as banqueting/conferences resume; and higher income from management contracts,” the brokerage said in a report. It maintainsWe FY23/FY24 EBITDA estimates on account of an ongoing demand recovery in Business Hotels. “We maintain our Buy rating with a SoTP-based TP (target price) of Rs 278 per share,” the brokerage firm added.
IDBI Capital: Buy
Target price: Rs 278
Despite Omicron woes in the beginning of the quarter, IHCL reported healthy 57%/60% occupancy and Rs14,554/Rs7,226 ADR in leisure/non-leisure segment in domestic market. The stock remains IDBI Capital’s preferred pick in hospitality sector. “We like IHCL in domestic hospitality space given its dominant positioning in leisure space, robust inventory addition through management contract, deleveraging of balance sheet post fundraising and sustainable margin expansion owing to cost optimization,” it said in its report. IHCL will remain focused on inventory addition through management contracts, growth in new businesses and cost optimization measures in near term, the brokerage added. It maintains a buy call on the stock with a target price of Rs 278 per share.
ICICI Securities: Buy
Target price: Rs 292
Analysts at ICICI Securities believe that IHCL is well poised to benefit from the expected recovery in the hotel business cycle from H1FY23 (April22) and are enthused by the
company’s efforts to leverage its existing brand equity to focus on new business segments, focus on cost optimisation, asset-light management contract model to expand room portfolio, and net cash balance sheet post Rs 4000 crore of equity fund raise through a rights and QIP issue in H2FY22.
“While Q4FY22 was an Omicron impacted quarter leading to 22% QoQ decline in IHCL’s consolidated revenue, we reiterate our BUY rating on Indian Hotels Co Ltd. (IHCL) with a revised SoTP-based target price of Rs 292 per share (earlier Rs 285) owing to 4% increase in FY24E EBITDA estimate, valuing the stock on 22x Mar’24E EV/EBITDA,” the brokerage firm said in its report.
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