BackRakesh Jhunjhunwala portfolio: Motilal Oswal bullish on this hotel stock
Revenge tourism has led to an increase in staycation bookings in metros. The brokerage expects a similar trend is expected to continue in the medium-term
PremiumFaster demand revival in the leisure travel segment has aided Indian Hotels performance in FY21, said Motilal Oswal in a note on Monday. Indian Hotels also saw increased demand due to ‘staycation’ demand in Tier I and II cities. The brokerage expects the trend to continue further, as the company saw a higher occupancy rate, followed by an increase in average rates.
Revenge tourism has led to an increase in ‘staycation’ bookings in metros. The brokerage believes that a similar trend is expected to continue in the medium-term. The industry is expected to project accelerated growth in 2HFY22 across domestic and international hotels, it said.
Motilal Oswal expects a gradual/sharp recovery in FY22E/FY23E on a low base, improvement in ARR once things normalize, improved occupancies, positivity in cost rationalization efforts in FY21, an increase in F&B income as banqueting/conferences resume, and higher income from management contracts.
"New revenue generating avenues have a higher EBITDA margin, and this is being done without deploying capital or with very minimal capital, which bodes well for RoCE. We maintain Buy rating on the stock," the brokerage added.
Its international business also witnessed traction. Hotels in London and Cape Town saw good demand during the last 10 days of 1QFY22. Indian Hotels has a presence in New York and San Francisco which have shown a higher resilience with respect to spread/control of COVID-19.
The US government has allowed fully vaccinated people to travel, which in turn, as per Motilal Oswal, is expected to push international travel. In the medium term, the region is expected to perform well.
As per the BSE shareholding pattern of Indian Hotels, Rakesh Jhunjhunwala and his wife Rekha Jhunjhunwala hold 1.05% stake each in the company as of June 2021 quarter.
Indian Hotels (IHIN) manages a portfolio of Hotels, resorts, jungle safaris, palaces, spas, and inflight catering services. It offers services across four continents, 12 countries, and in over 80 locations.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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