Buy Indian Hotels Company; target of Rs 7,400: Sharekhan

Sharekhan's research report on Indian Hotels Company

Indian Hotels Company Ltd’s (IHCL’s) Q1FY2025 numbers were a mixed bag, with revenues growing by 5.7% y-o-y while EBIDTA margins rose 103 bps y-o-y to 29%, resulting in better-than-expected PAT growth of 10%. Q2 will be among the strongest quarters, with July revenues rising above 20%. H2FY2025 will also see good growth momentum led by higher demand from recovering foreign tourist arrivals and improvement in some of the key international properties. Excluding consolidation of Taj SATS, revenues should grow by over 10% in FY2025. New businesses should grow by 30%. EBIDTA margins will see consistent improvement in the quarters ahead.

Outlook

IHCL’s Q1FY2025 was an aberration and we expect strong recovery in the performance from Q2FY2025. The company has charted a strong growth plan to be achieved by FY2025-26 with a strong improvement in cash flows and strengthening balance sheet with a focus on becoming debt-free. EBITDA margins will consistently improve in the coming years. With strong room inventory, IHCL is the best pick to capture strong growth momentum in domestic tourism in the coming years. The stock trades at 28x/23x its FY2025E/26E EV/EBIDTA, respectively. We maintain a Buy recommendation on the stock with an unchanged price target of Rs. 679.