BackRakesh Jhunjhunwala portfolio stock hits 52-week-high: Buy, sell or hold?
A mid-cap company with a market worth of ₹38,080.91 crore, Indian Hotels Company Ltd. operates in the consumer discretionary industry.
PremiumA mid-cap company with a market worth of ₹38,080.91 crore, Indian Hotels Company Ltd. operates in the consumer discretionary industry. After the firm released its mix Q1FY23 results, the research analysts of the brokerage companies are bullish on the stock, which will cause this Rakesh Jhunjhunwala portfolio stock to reach a new high. The stock closed with a negative gap of 0.94% at ₹268.10 per share today on the BSE after reaching a 52-week high of ₹277.00 today. On the BSE, the stock hit a 52-week low of ₹128.93 on August 23, 2021, and it is currently trading 107% above the low at the current market price of ₹268.10. A buy call with a target price of INR320 has been issued by Motilal Oswal for Indian Hotels' shares. While ICICI Securities has set a target price for the stock of ₹330, both forecasts will lead the stock to hit a new high.
In Q1FY23 Indian Hotels reported a revenue of ₹1,293 Cr which was ₹370 Cr in Q1FY22 a YoY rise of 249%. The company reported an EBITDA of ₹405 Cr in Q1 FY 22-23 compared to ₹123 Cr in Q1 FY21-22 a YoY rise of 229%. The EBITDA margin of the company reached 31.3% which is a record high since Q1 FY10-11. The company reported a profit before tax (PBT) of ₹231 Cr in Q1FY23 compared to ₹315 Cr in Q1FY22 and the profit after tax (PAT) of the company reached ₹170 Cr in Q1FY23 compared to ₹277 Cr in Q1FY22. However, on a QoQ basis the company reported a 129% jump in net profit from ₹74.19 Cr in the quarter ended March to ₹170 Cr in the quarter ended June.
The research analysts of Motilal Oswal said “IH's asset-light model as well as new/reimagined revenue-generating avenues, with higher EBITDA margin, bodes well for an expansion in RoCE. We expect the strong momentum to continue in FY23 and FY24, led by: a) an improvement in ARR and occupancy on account of favorable demand-supply dynamics; b) ongoing cost rationalization efforts; c) higher income from management contracts; and d) unlocking value by launching reimagined and new brands."
Commenting on the future price performance of the stock, Motilal Oswal said in a note that “Factoring in a better than expected performance in 1QFY23 from standalone and key subsidiaries such as Piem and Roots, on the back of higher ARR and occupancy, we raise our FY23/FY24 EBITDA estimate by 22%/11%. We maintain our Buy rating with a SoTP-based TP of INR320 per share."
ICICI Securities has said in a note that “IHCL’s performance was far ahead of our estimates led by a sharp recovery in corporate demand. Along with the improved outlook, the company is also focusing on driving more efficiencies through cost optimisation. We remain positive on the company and retain our BUY rating. We value IHCL at ₹330 i.e.23x FY24E EV/EBITDA."
Commenting on the future price performance of the stock, ICICI Securities highlighted opening doors fully for foreign tourists (FTAs) from March 2022 to provide further fillip to leisure and business hotel room demand from FY23 onwards, under AHVAAN 2025, the company plans to have 300+ hotel room portfolio with zero net debt status. IHCL also aims to achieve 33%+ margins (35% for new businesses) through cost efficiencies, expect revenue CAGR of 32.2% during FY22-24E. Business to recover fully to pre-Covid levels while EBITDA to surpass pre-Covid levels in FY23E; margins seen at over 24% in FY24E, which has the potential to further expand by ~100 bps thereafter and improved cash flows, equity infusion and divestment of non-core assets to make the company net debt free in FY23E as the key growth highlights.
Brokerage firm Sharekhan said in a note that “Indian Hotels Company Ltd (IHCL) registered one of the strong quarter in the post pandemic era led by strong room demand in the domestic market especially from domestic leisure travel segment and recovery in the corporate travels. IHCL revenues grew by 3.67x to Rs. 1,266.1 crore (3-year CAGR of 7%). This is much better than our as well as street expectation of Rs. 1,145.0 crore and Rs. 1,173.0 crore. IHCL domestic hotels occupancy and ARR grew by 9% and 31% respectively over Q1FY2020 compared to industry growth of 4% and 16% respectively over Q1FY2020. IHCL’s domestic occupancy ratio stood at 68% in Q1FY2023 vs. 62% in Q1FY2020 while Average room rentals stood at Rs. 8,423 per room compared to Rs. 6,438 per room in Q1FY2020. Key international destinations such as USA and St James Court, London registered a revenue/EBITDA growth of 85%/123% and 111%/109% respectively. Ginger achieved EBIDTA margins of 41% (higher compared to base margins) and is PBT Positive in Q1. Qmin, achieved Rs. 100 crore revenue marks within two years of inception. EBIDTA margins improved at 29.8%. EBIDTA stood at Rs. 377.9 crore in Q1FY2023 as against a loss of Rs. 149 crore in Q1FY2022."
“Room demand is expected to remain ahead of room supply for next 2-3 years which will help occupancies to remain high. The company has charted a strong growth plan by FY2025- 26 with strong improvement in cash flows and strengthening the balance sheet with focus on becoming improving cash flows. Pent up demand in the domestic leisure travel along with recovery in inbound tourism will help in posting strong performance in the coming quarters. EBITDA margins will consistently improve in the coming years. Thus we maintain IHCL as one of our top picks in the hospitality space. The stock trades at 26.1x/18.9x its FY2023E/24E EV/EBITDA. We maintain a Buy recommendation on the stock with a revised price target of Rs. 320," said the research analysts of the broking firm Sharekhan.
As per the shareholding pattern of Indian Hotels available on BSE, ace investor Rakesh Jhunjhunwala holds 1,57,29,200 shares or 1.11% stake in the company whereas his wife Rekha Jhunjhunwala holds 1,42,87,765 shares or 1.01 stake in the company for the quarter ended June.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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