Among two dozen listed Tata group stocks, only one stock has managed to deliver over 100 per cent return in 2022 so far. This is an associate of India Hotels, Oriental Hotels.
Indian Hotels and other Tata group companies owned 39.1 per cent stake in the hotel chain while the family members of late Chennai-based industrialist DS Reddy held 28.5 per cent stake in it as of September 30.
The hotel chain owns seven hotels with an aggregate inventory of 825 rooms in South India, which operate under the Taj, Seleqtions, Vivanta and Gateway brands. While the hotels are spread across six south Indian cities, two of flagship properties – Taj Coromandel and Taj Fisherman’s Cove – both located in Chennai, contribute around 60 per cent of Oriental’s revenues.
Over a closing of Rs 39.05 on December 31, 2021, shares of Oriental Hotels have climbed 106 per cent to Rs 80.55 level in Tuesday’s trade. The scrip is in fact up 128 per cent over its 52-week low of Rs 35.40, making existing investors wonder whether they should sell or hold the stock.
Technical outlook
After seeing a strong momentum of late, the scrip has turned rangebound in the last 3-4 weeks. Technical experts are mixed on the counter.
Milan Vaishnav, Founder & Technical Analyst at Gemstone Equity Research said the stock has by and large remained in a steady uptrend all through 2022 but the most recent price action shows that after such a decent runup, it is time that investors look towards booking profits in this stock.
he noted that the stock has marked a high of Rs 87.70 and has shown some signs of it taking a breather. Following a small double top, the price has shown some retracement, Vaishnav said.
“Importantly, the last phase of up move over the past 2 months has come with a strong bearish divergence of the RSI against the price. On the weekly timeframe, the prices have formed a rising wedge pattern; all these cumulatively hint at a potential top in place for the stock. From the technical standpoint, it would be prudent for the investors to book profits or protect profits at current levels. However, if the up move continues then one can re-enter this stock above Rs 88 levels,” Vaishnav said.
Independent Analyst Manish Shah said Orient Hotels has showed presence of a strong trend on the weekly time frame.
He noted that the Directional movement index is showing strong ADX values and the 20-day moving average is in a rising trajectory.
Such type of a creeping uptrend can last for a long time and price may not show a steep decline, he suggested.
On the daily time frame, trade prices are caught in a trading range between Rs 86 and Rs 72 for almost 4 weeks. This sideways movement marks a pause in the existing uptrend. On the upside, if prices break above Rs 82 expect a continued rally to Rs 110 and above that to Rs 120. Overall, hotel stocks are in an uptrend and sooner or later prices will see more upsides to higher zones. Keep a stop below Rs 69 for long trades,” Shah said.
Fundamentals
Oriental Hotels reported a 30.7 per cent jump in operating income at Rs 1,77.40 crore for the first half of FY23 compared with the pre-Covid levels of Rs 135.70 crore in H1 FY20, aided by improved demand, stemming from business travel, transient passengers, leisure travel and MICE events – both weddings and corporate MICE, ICRA noted in November.
The operating profit margin for H1 improved to 27.1 per cent from 7.2 per cent in H1 FY2020, benefitting from improved operating leverage and sustenance of cost optimisation measures undertaken in the last two years, ICRA said.
“While OHL has relatively high debt levels for its scale of operations due to debt-funded capex and net losses in the past, its coverage metrics have improved in H1 FY2023, on the back on healthy accruals. OHL’s net debt/OPBDITA improved to 2 times in H1 FY2023 as against 13.3 times in H1FY2020. OHL’s interest coverage metrics also improved to 4.7 times in H1 FY2023 from 0.7 times in H1 FY2020,” ICRA noted.
ICRA expects revenues and operating profits for Oriental Hotels are likely to witness healthy improvement on full-year basis in FY2023. The revenue growth momentum is expected to sustain going forward, with healthy demand outlook for the hotel industry, while improved operating leverage and sustenance of cost-optimisation measures undertaken by the company during the pandemic period are likely to support accruals, it said.
“Despite this, the company’s scale is likely to remain moderate, along with concentration of revenues in the Chennai market. The company has total capex plans of around Rs. 65.0 crore over the period H2 FY2023 to FY2025 and this is likely to be funded through internal accruals. ICRA expects the coverage metrics to gradually improve from current levels over the medium term, supported by its anticipated healthy accruals and absence of debt-funded capex plans. OHL’s liquidity position also expected to be adequate over the medium term,” it said.
Not many fundamental analysts track this stock.
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