Mumbai: TAJGVK is a joint venture between Indian Hotels Co Ltd (IHCL) and the Hyderabad-based GVK group. It operates in Hyderabad, Chandigarh and Chennai, and has five properties operational, with around 900 rooms.
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As the economic revival gathers steam, we expect tourist arrivals to increase from 2QFY2010E, which will directly benefit the hospitality industry.
Moreover, TAJGVK is on an asset-light expansion strategy to strengthen its grasp on the Hyderabad market. On its EV/Room of Rs1 crore, which is in line with the per-room average construction cost, we believe that the stock is fairly priced.
Moreover, IHCL, the industry leader, currently has an EV/Room of Rs1.2 crore, which makes the risk-reward unattractive for an investment in TAJGVK.
Although we remain positive on the industry, considering TAJGVK’s valuations at this juncture, we Initiate coverage with a NEUTRAL rating on the stock.