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Anand Rathi
Indian Hotels (Buy)
Target: ₹175
CMP: ₹150.75
We attended the Indian Hotels’ investor day. The company reckons that demand will completely revive in FY23 subject to the speed of vaccination.
It wants to focus on and expand its new brands and business started in the last 1-2 years and aims at a further 10 per cent revenue (about 50-80 per cent EBITDA flow through) from these businesses in the next 2-3 years. It reiterated its focus on driving asset-light profitable revenue growth, which would expand RoCEs.
On the subsidence of the Covid-19 pandemic, we expect it to outclass others, driven by its dominance in the Indian hotels sector, superlative brand equity and well-diversified portfolio across business segments and price-points.
Indian Hotels owns or manages more than 4,534 rooms in its Ginger brand in 54 hotels. Given the lower room-rates, expansion of this chain would be driven by lease contracts rather than just management contracts. Renovations/re-branding have been well accepted. Thirty six per cent of the 54 hotels have been renovated and converted to lean Luxe. The company aspires to expand its Ginger brand to 100 hotels soon.
We retain our ‘Buy’ rating on the stock with a new target price of ₹175; earlier ₹130 (sum-of-parts, valuing at 19x consolidated FY23 EBITDA from 16x earlier).
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