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Buoyant demand continues to drive growth

Operating performance in line with our estimate

* Indian Hotels (IH) reported consolidated revenue growth of 17% YoY in 4QFY24, led by ~19% YoY revenue growth in the standalone business. Growth in the standalone business was driven by better occupancy (up 440bp YoY) and ARR (up 4% YoY; LFL 8% excluding Ginger Santacruz). Standalone management contract revenue rose 32% YoY to INR1.5b.

* We broadly maintain our FY25/FY26 EBITDA estimates and reiterate BUY with our SoTP-based TP of INR680.

New and reimagined business continues to deliver strong growth

* Consolidated revenue was up 17% YoY/down 3% QoQ at INR19.1b (in line). EBITDA grew 23% YoY but declined 10% QoQ to INR6.6b (in line). Adj. PAT was up 27% YoY/down 8% QoQ at INR4.2b (in line).

* Standalone revenue/EBITDA rose 19%/23% YoY to INR13.4b/INR5.9b (up 5% each QoQ), aided by strong OR growth (up 440bp YoY/230bp QoQ) to 79.1%. ARR grew 4% YoY but declined 3% QoQ to INR17,546. Like-for-like ARR growth in 4Q stood at 8%, excluding Ginger Santacruz, which became operational in Nov’23 having lower ARR of INR6,700. RevPar grew by 10% YoY.

* For subsidiaries (consol. less standalone), sales stood at INR5.6b (up 14% YoY/down 17% QoQ) and EBITDA came in at INR737m (up 27% YoY/down 58% QoQ).

* FY24 revenue/EBITDA/adj. PAT grew 17%/20%/26% to INR67.7b/INR21.6b/ INR12.6b

* IH’s new and reimagined business verticals, comprising Ginger, Qmin, amã Stays & Trails, The Chambers (membership fee) and TajSATs, posted revenue of INR15.9b in FY24 (up 35% YoY; ~2x growth vs. core enterprise revenue).

* Revenue from key subsidiaries PIEM/Roots/Benares/St. James Court/UOH Inc. rose 13%/22%/31%/18%/2% YoY in FY24.

* In FY24, CFO stood at INR19.4b (vs. INR16.2b in FY23) and net cash stood at INR12.25b (vs. INR2.35b in FY23).

Highlights from the management commentary

* Outlook: The uptrend in the hospitality industry is expected to continue, with all India demand growth likely to be 10.6% over FY24-27 vs. supply growth of ~8%.

* Guidance: In FY25, IH expects to sustain double-digit revenue growth, with new businesses expected to grow 30%. It expects to sustain margins. IH targets to open ~25 hotels in FY25.

* Gateway: IH will introduce the reimagined brand ‘Gateway’ in FY25. The brand rollout will commence with launches in Bekal and Nashik in 1QFY25. The brand is expected to scale up to 100 hotels by 2030.

Valuation and view

* We expect the strong momentum to continue in FY25, led by: 1) an increase in ARR due to healthy demand, asset management strategy (upgrades in hotels), and corporate rate hikes; 2) sustaining higher occupancy levels led by favorable demand-supply dynamics; 3) strong room addition pipeline till FY28 in both owned/leased (2,779 rooms) and management hotels (10,174); 4) higher income from management contracts; and 5) value unlocking by scaling up reimagined and new brands.

* We broadly maintain our FY25/FY26 EBITDA estimates and reiterate BUY with our SoTP-based TP of INR680.

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