2025-01-28 10:55:00 am | Source: Motilal Oswal Financial Services Ltd
Buy Indian Hotels Ltd For Target Rs.960 by Motilal Oswal Financial Services Ltd
Buy Indian Hotels Ltd For Target Rs.960 by Motilal Oswal Financial Services Ltd

Healthy RevPAR growth boosts revenue

Operating performance in line with our estimate

* Indian Hotels (IH) reported strong consolidated revenue growth of 29% YoY in 3QFY25, led by healthy RevPAR growth of 15% (ARR up 13% and OR up 120bp YoY) in its standalone business. Like-for-like hotel revenue growth stood at ~15% YoY, while TajSats grew by 18% YoY. The new and reimagined business reported 40% YoY growth. Management contract revenue rose 32% YoY to INR1.8b (including INR100m in brand and technical fees).

* IH upholds its double-digit revenue guidance, as healthy demand across key cities should help IH sustain higher OR and increase ARR. We expect IH to replicate a similar performance in 4QFY25, with revenue/EBITDA/adj. PAT likely to grow 31%/34%/26% YoY, aided by a strong wedding season (higher dates in 4Q YoY), an increase in FTA, and healthy traction in the MICE segment led by convention centers and favorable demand-supply dynamics.

* We broadly maintain our FY25/FY26 EBITDA estimates and reiterate BUY with our SoTP-based TP of INR960.

 

New and Reimagined business propel operating performance

* 3Q consolidated revenue/EBITDA/adj. PAT grew 29%/31%/29% YoY to INR25.3b/INR9.6b/INR5.8bb (all in line with estimates).

* Standalone revenue/EBITDA rose 15%/22% YoY to INR14.7b/INR6.8b, aided by OR growth (up 120bp YoY to 78%) and increase in ARR (up 13% YoY to INR20,440). RevPar grew 15% YoY to INR15,943.

* For subsidiaries (consol. less standalone; including TajSATS), sales/EBITDA grew 55%/61% YoY to INR10.6b/INR2.8b.

* IH’s new business verticals, comprising Ginger, Qmin, and amã Stays & Trails, grew 38% YoY to INR1.6b, while TajSATs posted 18% YoY growth to INR2.7b. Chambers reported YTD revenue of INR1b (+18% YoY).

* Revenue from key subsidiaries, UOH Inc./St. James/PIEM/Roots/Oriental /Benares, grew 20%/2%/15%/29%/15%/18% YoY to INR2.6b/INR1.3b/ INR1.9b/ INR1.3b/INR1.2b/INR400m in 3QFY25.

 

Highlights from the management commentary

* Demand: IH is on track to achieve double-digit revenue growth in FY25, driven by strong demand from large-scale events, domestic tourism, an extended wedding season, increased travel to spiritual destinations, and favorable weather for foreign tourist arrivals, with key sporting and business events further boosting traction.

* Sea Rock: IH received the intimation of disapproval (most important before starting a construction) for its Sea Rock hotel. It expects construction to commence in 2HCY25.

* International business: The international consolidated portfolio achieved 78% occupancy (+400bp YoY) with 9% RevPAR growth, driven by a 25% increase at The Pierre, New York. The US market is poised for a strong 4QFY25 due to the swearing in of the new President.

 

Valuation and view

* The outlook remains strong for IH, led by healthy traction in the core business and an accelerated growth trajectory in the new and reimagined businesses.

* We expect the strong momentum to continue in the medium term, led by: 1) an increase in ARR due to healthy demand, asset management strategy (upgrades in hotels), and corporate rate hikes; 2) higher occupancy levels amid favorable demand-supply dynamics; 3) strong room addition pipeline until FY28 in both owned/leased (3,564 rooms) and management hotels (14,100); 4) higher income from management contracts; and 5) value unlocking by scaling up reimagined and new brands.

* We broadly maintain our FY25/FY26/FY27 EBITDA estimates and reiterate BUY with our SoTP-based TP of INR960.

 

 

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