Indian Hotels Company offers the most diversified play on domestic tourism industry with presence in major leisure and business destinations as well as offerings in both luxury and mid market segments.
The company has chalked out healthy expansion plans which would add about 2,500 rooms on a consolidated basis over next three years.
However, we believe Average Room Rates (ARRs) could dampen gains from volume expansion as major cities like Mumbai and Delhi would see only a moderate tariff growth while Bangalore is expected to witness decline in room rentals in FY09.
With reasonable valuations (P/E of 10.8x on our FY10E earnings), downside risks to the stock appear limited. We maintain our MARKET PERFORMER stance on the company.