Buy Indian Hotels Company Ltd For Taget Rs.440 - Motilal Oswal Financial Services
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IH’s (Indian Hotels’) FY23 annual report highlights the strong growth witnessed by the company during the year, on the back of robust traction in core business. The strong pipeline of 10,145 rooms (~48% of operational portfolio) coupled with rapidly scaling reimagined new businesses are expected to drive the diversified growth path for the company going ahead.
* IH has focused on tapping into adjacent categories and re-imagining its existing businesses. TajSATS and Ginger (re-imagined businesses) have witnessed significant success and continue to have a robust outlook going ahead.
* The revenue of subsidiaries (both domestic and international) were up ~22% from the pre-covid levels, while the operating profitability has doubled over the same period, led by strong growth in operating performance of all domestic subsidiaries.
* IH witnessed robust growth in its revenue (90% YoY to INR58.1b), driven by strong traction across all businesses. This, along with its cost management activities, led to a surge in its operating profitability (EBITDA grew 4.5x YoY to INR18.1b in FY23).
* The company generated a healthy cash flow during the year (CFO of INR16.5b in FY23, up 2.5x YoY), led by improvement in working capital and business activities.
Re-imagining the growth story
* Displaying its commitment to ‘House of brands’ ecosystem, IH has been strategically focusing on expanding into adjacent categories. The company has built a diverse portfolio of new businesses around its core operations.
* Currently, IH has ~117 homestay properties (including those in the pipeline) under Ama Stays and Trails. Additionally, the company operates Qmin cafés and food trucks across 24 cities, boasts over 450 bars and restaurants within its F&B category, manages eight clubs under ‘The Chambers’, and operates ~ eight kitchens under TajSATS.
* Furthermore, IH has a strong presence in the wellness sector with over 85 Spas under its Wellness Circle. In addition, the company operates 23 boutiques under the ‘Khazana’ brand and manages seven ‘niu & nau’ salons. Further, IH has successfully re-imagined two of its existing business –TajSATS and Ginger, which are witnessing positive traction.
* TajSATS recorded its highest ever revenue of INR6.4b in FY23 (growth of ~53% over the pre-covid levels), led by key initiatives, such as technological enhancements, capacity expansion, and innovative menu designs.
* Further, the operational performance of TajSATS improved across all parameters with the business delivering an EBITDA margin of ~20% in FY23 (v/s ~12% in FY20). EBITDA for FY23 stood at INR1.27b (v/s INR0.5b in FY20), resulting in a PAT of ~INR0.8b.
* TajSATS holds a ~58% market share in India’s airline catering market. Going ahead, it will continue to increase its pan India footprint in the segment with focus on self-contained and compact flight kitchens. The company is committed to adopt the best-in-class technology to remain in the forefront of industry standards.
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