Indian Hotels (IHCL) reported consolidated net sales of Rs29.7 billion, 16.8% higher as compared to Rs25.4 billion in FY07. The growth in revenues was driven by higher room sales, healthy improvement in average room rates and steady growth in F&B business across the key markets.
Standalone sales during the year grew 14.5% to Rs17.6 billion. In FY08, room sales, F&B and other operating income grew 16%, 12% and 17% to Rs.9.8 billion, Rs.5.8 billion and Rs.2 billion, respectively.
For FY08, the company has maintained occupancy ratio at 73% while ARRs and RevPARs both have increased by 16% to Rs10,674 and Rs7,842 room per day.
We are confident about the strong industry trends over the next 2-3 years, given increasing tourist inflow and continuing demand-supply mismatch in hotel rooms, albeit economic slowdown.
IHCL is expected to open 16 new hotels in FY09 with the room inventory of around 2100. Going forward, we expect 19% and 26.3% compounded growth in revenues and earnings over the next two years.
In FY09, we expect revenue growth of 18.2% to Rs35.1 billion and net profit growth of 24.9% to Rs5.1 billion.
IHCL remains our preferred pick from hotel industry. We maintain our BUY recommendation with DCF-based revised target price of Rs.171. (Rs.180 earlier)