Motilal Oswal

Indian Hotels (Buy)

Target: ₹183

CMP: ₹142.6

Despite the second Covid wave, standalone RevPAR nearly doubled as compared to last year due to ARR growth and occupancy improvement, as the impact this time around was less severe and the recovery was faster as compared to the first wave. Additionally, Indian Hotel’s operating performance was strong on the back of cost saving measures and operating leverage.

Revenue/EBITDA in Q1FY22 was above our estimate. Factoring the same, we have increased our FY22 revenue/EBITDA estimate by 2 per cent/4 per cent, and have maintained our estimate for FY23.

Faster demand-revival in the Leisure Travel segment has aided IHIN’s performance in FY21. The second Covid wave has delayed recovery in the Hospitality sector. However, the impact this time is less severe and the recovery is quick when compared with last time.

While FY21 earnings are weak, we expect a gradual/sharp recovery in FY22/FY23 on: a) a low base, b) improvement in ARRs once things normalise, c) improved occupancies, d) positivity in cost rationalisation efforts in FY21, e) an increase in F&B income as banqueting/conferences resume, and f) higher income from management contracts. We maintain ‘Buy’ rating on the stock, with a September 2023 SoTP-based target of ₹183.