Buy Indian Hotels for the Target Rs 870 by Motilal Oswal Financial Services Ltd
Healthy revenue momentum to sustain in FY27 Earnings in line with estimate
* Indian Hotels (IH) reported healthy consolidated revenue growth of 15% YoY in 1QFY27, led by 18% growth in the standalone business and 11% growth in subsidiaries. Growth in the standalone business was led by room revenue (RevPAR up 14%), followed by F&B revenue (up 9%) and management fees (up 20%).
* IH is expected to clock 12-14% growth in FY27, driven by sustained domestic travel demand, continued strength in leisure destinations, and robust growth across its asset-light management business and emerging brands such as Ginger, Qmin, amã Stays & Trails and Tree of Life. Moreover, the company has a pipeline of 32,500 keys (with 81% of the signed pipeline being asset-light), almost equal to its current operational keys of 33,609, thereby supporting sustained growth momentum.
* We expect IH’s performance to continue its uptrend, with a CAGR of 14%/17%/20% in revenue/EBITDA/adj. PAT over FY26-28. We broadly maintain our FY27/FY28 EBITDA estimates and reiterate BUY with our SoTP-based TP of INR870
Domestic business growth offsets softness in international business
* Revenue grew 15% YoY to INR23.4b (est. in line). Hotel segment/Taj Sats grew 17%/3% YoY to INR20.5b/INR2.9b
* EBITDA grew 17% YoY to INR6.7b (est. in line). EBITDA margins expanded 54bp YoY to 28.8% (est. 28.4%) Adj. PAT grew 21% YoY to INR3.6b (est. in line).
* Standalone revenue/EBITDA grew 18%/31% YoY to INR12.3b/INR4.8b, aided by an increase in like-for-like ARR (up 8% YoY to INR15716), while OR expanded 400bp to 78%. F&B/other services/management fee income grew 9%/41%/20% YoY.
* Subsidiary (consol less standalone) sales stood at INR11.0b, up 11% YoY. Subsidiary EBITDA came in at INR1.9b, down 8% YoY.
* UOH/St. James’ revenue grew 4%/1% YoY, with EBITDA for UOH staying flat, while St. James witnessed an EBITDA decline of 25%.
* IH’s new business verticals, comprising Ginger, Qmin, and amã Stays & Trails, grew 22% YoY to INR1.9b.
* IH reported gross cash of INR44.4b as of Jun’27
Valuation and view
* We remain optimistic on IH’s growth outlook despite near-term geopolitical and macroeconomic uncertainties, led by healthy traction in the core business as well as new and reimagined businesses. This is also attributed to the expansion of the brandscape through the acquisition of niche category hotels.
* We expect the strong momentum to continue in the medium term, led by:
1) a strong room addition pipeline in owned/management hotels (6,350/26,250 rooms)
2) strategic acquisitions
3) continued favorable demand-supply dynamics, and 4) increasing MICE activities in India.
* We broadly maintain our FY27/FY28 EBITDA estimates and reiterate BUY with our SoTP-based TP of INR870.
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