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Demand momentum unrelenting

Indian Hotels (IH IN) reported 22% topline growth, ~6% pp higher than our estimate. A 27% RevPAR growth for the standalone business was driven by 700bps expansion in occupancy and 17% growth in ADR. Strong demand, high profile MICE activities and major upgrades across marquee hotels translated into higher footfalls leading to stronger pricing power. The outlook is upbeat for the next 18 months , driven by strong in -season demand in H2FY27 and expected heightened MICE activity in FY28. New hotel signings remain strong and IH continues to cash in on sustained demand momentum through industry -leading hotel openings. Revise to Buy with a higher TP of INR 922 (from INR 786) based on SoTP .

Guidance raised for FY27:

Driven by 18% topline growth in H1 and strong revenue growth visibility for seasonally strong quarters of H2, IH has upgraded its FY27 revenue growth guidance from 12 -14% growth to 15 -17%. High demand from social and MICE events coupled with strong non -lik e-for-like growth are other growth levers. Hotel business is expected to deliver ~20% topline growth while TajSATS may consolidate this year, impacted by the flight cancellations due to the Middle East geopolitical conflict.

FY28 growth momentum to be fuelled by MICE:

Expect IH and the hotel industry in general to further build on the growth momentum as the number of auspicious days for marriage is 40% higher in FY28 to ~95 days versus 68 days in FY27. We expect scale up in both occupancy and ARR as well as pick -up in demand during the off-season for leisure location hotels. There may be upside risk to ARR if any high -profile events or state guests’ visit coincide with the marriage season. Management fee income growth will be in high teens driven by large hotel opening pipeline.

West Asia crisis-led airline curtailments dent Taj SATS business:

Taj SATS reported a weak Q2, with revenue declining 1% YoY and EBIT down 37% YoY. The West Asia conflict raised fuel prices, which led airlines to cut capacity and schedules. These curtailments came mainly in June, so Q1 was hurt only in part, while Q2 bor e the full impact. However, the business held its topline by diversifying into non -aviation institutional catering , which has lower margins. While this weakness is cyclical, recovery is hinged upon the progress in peace talks and normalization in the Middle East region

Revise to Buy with a higher TP of INR 922:

The classic demand -supply mismatch will be at play to drive RevPAR growth in the next 18 months given accelerated demand growth. We have raised IH’s FY27E/28E/29E revenue estimates by 3%/11%/11% and EBITDA estimates by 8%/17%/17% respectively. We revise IH to Buy (from Accumulate) with a higher TP of INR 922 (INR 786 earlier) based on SoTP as we roll forward valuations to H1FY29 E estimates .

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