The hospitality industry rebounded sharply after the concerns around the Covid-19 pandemic eased and some of the key stocks of the sector took a strong leap.
For instance, the stock of Indian Hotels Company surged 102% in the last one year. In the current calendar year, it has jumped more than 52% as of August 18 closing at ₹275.40 on BSE.
The company on August 8 reported its Q1FY23 consolidated profit at ₹170.05 crore against a loss of ₹277.34 crore in the same quarter last year. The June quarter of the last year was hit by the pandemic. In Q4FY22, the profit was ₹74.19 crore.
Let's take a look at what the fundamental and technical analysis reveal about the stock.
Analyst: Nishant Srivastava, Head-Retail Broking and Distribution, Reliance Securities
Indian Hotels is adopting a new asset-light model and the third quarter is the strongest quarter seasonally which would continue to fetch a higher valuation in the near term despite the stock trading at an all-time high. The new expansion of 14 more hotels is in the pipeline which will create additional revenues going forward.
The stock has been a consistent outperformer. The industry has surpassed its pre-Covid domestic occupancy with improved room rates, and better margin guidance ahead due to higher income from management contracts and holidays in the second and third quarter will improve further overall growth in demand.
Analyst: Rahul Goud, Research Analyst- Equity Research, CapitalVia Global Research
The stock is undervalued as it has returned 101.1% over the past year and is currently selling at a price-to-book ratio of 5.11 compared to the sector PB of 5.93.
With its leading position, improving asset mix, favourable margin profile, and sound balance sheet, Indian Hotels Company is a strong investment opportunity at the present market price, in our opinion.
The company is concentrating on the asset-light strategy by increasing the hotel mix through management contracts, which is a good plan given the developing scale.
The company's mutual fund holdings have grown by 1.02% over the past three months, which is a sign of growing corporate confidence. As a sign of the business's resilience, the company earned a free cash flow of 353.6 crore in FY22 as opposed to 534.16 crore in FY21.
"For a target price of ₹315, we advise the investor to purchase the stock at the current market price of ₹275 with a stop loss of ₹255," said Goud.
Analyst: Jigar S. Patel, Sr. Manager - Equity Research, Anand Rathi
On the weekly chart, this stock is near the resistance levels of approximately ₹280. Over the last one-and-half-month, the stock has seen 36% appreciation. If one is already holding, then one should book some profits between ₹275-280 levels.
Recently, the stock formed a shooting star candlestick pattern with a fair amount of volume which is a sign of weakness.
Last but not the least, the resistance levels mentioned above are also potential reversal zone of the bearish butterfly pattern (see the below chart). So, fresh buying at the counter is not advisable at the current market price, as weekly MACD (moving average convergence and divergence) is overstretched at higher levels which is a sign of exhaustion.
Analyst: Santosh Meena, Head of Research, Swastika Investmart
Indian Hotel is in a classical uptrend with higher top and higher bottom formation where it witnessed a smart V-shaped recovery from its 200-DMA (daily moving average).
However, it is not a good idea to chase momentum as it is approaching upsloping trendline resistance but any dip will be a good buying opportunity.
The previous swing high of ₹269 will be immediate support that coincides with its 20-DMA while ₹255-245 will be a sacrosanct demand zone to take fresh long positions.
On the upside, ₹290 is an immediate trendline resistance whereas ₹325 will be the next target level. Momentum indicators are looking tired in the overbought zone which poses a risk of profit booking.
According to a MintGenie poll, an average of 14 analysts have a ‘strong buy’ call on the stock.
Disclaimer: The views and recommendations are those of individual analysts or broking firms and not of MintGenie.