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Indian Hotels Company (IHCL) delivered a beat on consolidated revenue and margin, aided by standalone occupancy of 76.8% (vs. 72.1% in Q3FY23) and ARR/RevPAR growth of 17% YoY/25% YoY. IHCL expects growth to remain in double digits for FY25, with ‘business on books’ staying strong and new businesses expected to grow at over 30%YoY. We like IHCL’s diversified topline, operational efficiency, and debt-free balance sheet. IHCL has a pipeline of 82 hotels, and is set to add ~11k rooms (~8.7k room-adds over FY24-26E). This will aid consol. revenue/EBITDA CAGR of 14%/19% over FY23-26E, amid margin expansion. We raise FY25E/FY26E EBITDA by 7%/6%, on the results beat. We maintain ADD on IHCL, with TP of Rs525/sh (Rs485 earlier), ascribing 24x Dec-25E EV/EBITDA (23.5x earlier) amid continued strength in business.

Beat on Q3 estimates; standalone RevPAR up 25% YoY

Consol. revenue stood at 16.5%, up YoY (3%/6% above Street/our expectations). Company has maintained the growth momentum seen in Q1/Q2 (16%YoY each). EBITDA margin expanded by 190bps YoY (+1,250bps QoQ) to 37.3%, led by decline in employee cost and cost of raw material as share of revenue. Standalone revenue was up 20.6% YoY to Rs12.8bn (9% above our estimate) vs. 17%YoY/19%YoY growth in Q1/Q2, indicating pickup in momentum. Standalone occupancy was 76.8%, up by 470bps YoY. ARR was at 17% YoY, leading to RevPAR improving 25% YoY. Implied subsidiary revenue was up 9% YoY vs. 12%YoY/14% YoY growth in Q2/Q1, pointing to moderation in growth rate. New Business clocked growth of 33% YoY, with TajSATS clocking 34% YoY growth.

Growth to sustain in double digits as new businesses grow at a fast pace

IHCL expects revenue growth to sustain in double-digits YoY, aided by i) continued addition keys with an over 11.1k strong pipeline for FY24-27 (~8.5k through management contract); ii) new businesses growing at over 30% YoY aided by Qmin being added to more Ginger hotels, Ama Stays & Trails revenue doubling in FY25, and TajSATS well-poised to exceed Rs10bn in revenue in FY25 (vs. Rs 6.5bn in 9MFY24). TajSATS has levers for growth with increase in number of airports/flights and rise in non-aviation revenue for TajSATS. Plans to add 2 new full-service brands at a price-point below Rs10k for tier 2/tier 3 cities can aid further growth for IHCL.

FY23-26E EBITDA CAGR to clock at 19%; ADD

Company continues to focus on diversification of topline with new brands, along with investment in digitization that can help in mid- & long-term revenue growth and improvement in margin. Robust demand will aid RevPAR CAGR of 11% and consol. revenue/EBITDA CAGR of 14%/19% over FY23-26E, amid margin expansion. We have increased consol. EBITDA by 5%/7%/6% for FY24E/FY25E/FY26E, as we adjust for the revenue/margin beat. We maintain ADD on IHCL, with TP of Rs525/sh (Rs485 earlier), ascribing 24x Dec-25E EV/EBITDA (23.5x earlier) given continued strength in business.

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