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Target: ₹774
CMP: ₹652.30
We maintain a Buy on Indian Hotels Company Ltd (IHCL) with a revised PT of ₹774 (rolling over to September 2026 earnings). The stock trades at 26x/22x its FY2026E/27E EV/EBIDTA, respectively.
Q2-FY2025 to be among the strongest quarters, with July revenues rising by over 20 per cent y-o-y. Despite weak Q1, the company expected to post double-digit growth in H1FY25. Further, H2 will see good growth momentum aided by good domestic demand and recovering foreign tourist arrivals (FTA).
The management has guided for 25-30 new hotel openings in FY2025 (opened 6 hotels in Q1), with continued focus on capital-light strategy. With increasing share of capital light inventory, EBIDTA margins and return ratios will see consistent improvement in the coming years.
IHCL has charted a strong growth plan to be achieved by FY2025-26 aiming for a strong improvement in cash flows and a strengthening balance sheet with a focus on becoming debt-free. With a strong room inventory, IHCL is the best pick to capture strong growth momentum in domestic tourism in the coming years.
Any slowdown in corporate travel or a slower recovery in inbound and the outbound tourism industry would act as a key risk to our earnings estimates.
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