After 100% rally in a year, brokerages see more upside in this Jhunjhunwala portfolio stock

By admin On Sep 13, 2022

Shares of Indian Hotels hit their all-time high today after brokerage Jefferies said it saw a huge rise in margins for the Tata Group firm in FY24-25. Other brokerages too are still bullish on Indian Hotels despite a stellar 100 per cent rally in the last one year. Shares of Indian Hotels hit a record high of Rs 318.15 today against the previous close of Rs 314.80 on BSE. Indian Hotels stock is trading higher than the 5-day, 20-day, 50-day, 100-day and 200-day moving averages. The stock has risen 77 percent in 2022 and gained 107 percent in a year.

Total 0.44 lakh shares of the firm changed hands amounting to a turnover of Rs 1.39 crore on BSE. Market cap of the firm rose to Rs 45,403 crore on BSE. The stock hit a 52-week low of Rs 143.41 on September 20, 2021.

Meanwhile, late investor Rakesh Jhunjhunwala and his wife Rekha Jhunjhunwala held 3 crore shares or 2.12 per cent stake in Indian Hotels in the last quarter. While Jhunjhunwala owned 1.11 per cent or 1.57 crore shares, his wife Rekha held 1.01 per cent or 1.42 crore shares in the June quarter. The rally in the stock in the last one year can be attributed to good earnings show and aggressive expansion plans.

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In the first quarter of current fiscal, Indian Hotels reported a consolidated profit after tax (PAT) of Rs 170 crore, due to surge in demand as the occupancy and rates exceeded pre-COVID levels. The hospitality group logged a loss of Rs 277 crore during the corresponding period of the previous financial year. Revenue surged 249.45 per cent to Rs 1,293 crore in Q1, compared to Rs 370 crore in the year-ago period.

Jefferies in its latest update on the stock said, “The company’s margins could jump to 31-32 per cent for FY24-25 against 13 per cent in FY22. During Covid, IHCL has deployed several measures to contain its fixed cost and prune variable costs, and some of these are likely to be permanent.”

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Axis Securities too is bullish on the hospitality firm. The brokerage has initiated coverage on Indian Hotels with a buy call. It has assigned a target price of Rs 360 (EV/EBITDA 26x for FY25E EBITDA), implying an upside of 16 per cent from the current levels. At the time of recommendation, the market price of the firm stood at Rs 313.5.

“We expect the company could deliver 35 per cent of EBITDA margins based on operational leverage in Room & F&B business, new businesses with high margins and an increase of management contracts in the overall room inventory in FY24E and FY25E as management’ endeavour to achieve such margins under the strategy ‘Ahvan’ 2025, ” said Axis Securities.

International investment bank UBS too has assigned a buy call and raised its target price to Rs 375 from Rs 270 per share. “Average daily room rate has risen 31 per cent for business and 43-56 per cent for leisure/palaces expect short-/mid-haul destinations to recover strongly international inbound travel is likely to pick up in support of leisure demand, ” said UBS.

Indian Hotels has a portfolio of 242 hotels including 63 under development globally across 4 continents, 11 countries, and in over 100 locations. Its pipeline comprises 60 plus hotels consisting of 7,500 plus rooms across brands. It has devised a new strategy called ‘AHVAAN 2025’ which is a roadmap for profitable growth by FY25/26.

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