Shares of Indian Hotels Company jumped 6 percent in intraday trade on April 28, a day after the company announced its March quarter earnings.
The stock eventually closed 4.58 percent higher at ₹246.65.
The company's Q4FY22 consolidated revenue from operations jumped 42 percent year-on-year (YoY) to ₹872.08 crore against ₹615.02 crore in the corresponding quarter of the previous financial year. EBITDA for the quarter stood at ₹159 crore against ₹71.3 crore in Q4FY21.
The company reported a profit of ₹71.57 crore for the March quarter of FY22 against the loss of ₹97.72 crore in the same quarter last year.
Brokerages are positive on the stock after the company's March quarter scorecard.
Motilal Oswal Financial Services, which has a 'buy' call on the stock with a target price of ₹278, said that the company's asset-light model as well as new and reimagined revenue-generating avenues, with higher EBITDA margin, bodes well for RoCE expansion.
Evaluating the March quarter earnings, Motilal Oswal said the company's revenue was in line, while EBITDA came in below its estimates.
"We maintain our FY23/FY24 EBITDA on account of an ongoing demand recovery in business hotels," said Motilal Oswal.
"Like FY22, we anticipate a strong recovery in FY23 and FY24 on: (a) improvement in ARR once the economic activity normalizes; (b) improved occupancies, led by business travel as well as the Leisure segment; (c) cost rationalisation efforts; (d) an increase in F&B income as banqueting/conferences resume; and (e) higher income from management contracts," said the brokerage firm.
Brokerage firm ICICI Securities also has a 'buy' call on the stock with a target price of ₹292.
"While Q4FY22 was an Omicron impacted quarter leading to a 22 percent quarter-on-quarter (QoQ) decline in the company’s consolidated revenue, we reiterate our buy rating with a revised SoTP-based target price of ₹292 (earlier ₹285), valuing the stock on 22 times Mar’24E EV/EBITDA," said ICICI Securities.
ICICI Securities believes Indian Hotels Company is well poised to benefit from the expected recovery in the hotel business cycle from the first half of FY23 (Apr’22) besides the company's growth plans.
"We are enthused by the company’s efforts to leverage its existing brand equity to focus on new business segments, focus on cost optimisation, asset-light management contract model to expand room portfolio, and net cash balance sheet post ₹4,000 crore of an equity fundraise through rights and QIP issue in the second half of FY22," said the brokerage.
Key risks to our rating are fresh Covid waves globally and in India impacting demand and rise in costs denting margins, said ICICI Securities.
IDBI Capital also has a 'buy' call on the stock with a target price of ₹278 but underscored that Indian Hotels Company’s Q4FY22 result was below its estimates on key parameters.
"RevPAR (revenue per available room) was impacted in January 2022 amid the Omicron wave. However, the operational metrics have improved thereafter led by robust domestic demand in both leisure and corporate segment. The management cited that pick-up in the international segment will further aid growth momentum in the near term, resulting in further improved earnings," said IDBI Capital.
After the right issue and QIP, Indian Hotel’s debt profile has improved substantially. Net sales shot up by 41.8 percent YoY to ₹870 crore, while EBITDA came in at ₹160 crore, up 123 percent YoY. The company will remain focused on inventory addition through management contracts, growth in new businesses and cost optimization measures in the near term," IDBI said.
"We like Indian Hotels in domestic hospitality space given its dominant positioning in leisure space, robust inventory addition through a management contract, deleveraging of balance sheet post fundraising and sustainable margin expansion owing to cost optimisation," IDBI Capital added.
An average of 13 analysts polled by MintGenie have a ‘buy’ call on the stock.
Disclaimer: The views and recommendations made above are those of the broking companies and not of MintGenie.
