Accumulate Indian Hotels Ltd For Target Rs.536 - Elara Capital
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Firing on all cylinders
Average room rate up 17%
Indian Hotel Company (IH IN) reported a topline growth of 17% to INR 20bn, as estimated, on 470bps occupancy growth and 17% increase in ARR. Room revenues grew 21% to INR 9.8bn and F&B revenue was INR 7bn, up 11% YoY. Management fees grew 12.6% YoY to INR 1.3bn. EBITDA grew 23% YoY to INR 7.3bn and margin expanded 187bps to 37.3% on cost management. Going forward too, IH does not expect any challenge to contain costs.
Pace of new hotel openings to increase in FY25
With industry-leading portfolio addition, IH is on track to open 20 hotels in FY24 and two each month in FY25. Growth may continue to be asset light. IH is on strong footing, with a pipeline of 11,114 keys to be operationalized by FY27. It will continue to enjoy higher room rates amidst balanced demand and supply dynamics. RevPAR growth is likely to be strong in the next two years, led by limited new supplies coming in its core markets and healthy mix of transient customer mix.
Mass markets – IH may launch two new brands
IH plans to launch two new brand in the next six months. The positioning of the brands may be lower than Vivanta and may cater to the mass markets. The management plans to introduce a new brand or reimagine an existing one once existing brands cross the 100-hotels milestone. IH plans to introduce full service hotels in small cities with a banqueting space. Once launched, it plans to traction to 50 hotels quickly (may start with >10 hotels before launch of a new brand).
Valuations: Revise to Accumulate; new TP at INR 536
IH’s fortunes are closely linked to economic growth and disposable incomes, both of which may grow in the short-to-long term. IH is set to grow in terms of room additions at 23% in FY23-25E, higher ARR CAGR of 10% and a spike in the share of its F&B business (39% of topline), led by continued demand momentum. We marginally tweak FY24E/25E EBITDA/PAT and introduce FY26E estimates. Due to 28% run-up in stock in the last 3 months we revise IH to Accumulate from Buy, but with TP raised to INR 536 from INR 465, on 22x FY26E EV/EBITDA (roll over to FY26E)
Please refer disclaimer at Report
SEBI Registration number is INH000000933
