Buy Indian Hotels; target of Rs 144: Dolat Capital Market
Dolat Capital Market is bullish on Indian Hotels has recommended buy rating on the stock with a target price of Rs 144 in its research report dated February 04, 2021.
February 12, 2021 / 04:52 PM IST
Dolat Capital Market's research report on Indian Hotels
Indian Hotels (IHCL) Q3FY21 revenue decline of 60% YoY (vs. 86/75% in Q1/Q2) was better than estimates (-65% YoY). This was led by revival in leisure travel and weddings. IHCL's net debt increased by Rs 1.4bn QoQ (vs Rs 4.1/6.1bn in Q1/Q2) to Rs 30.8bn. The cash burn during the quarter was significantly restricted - a key positive. We remain positive on IHCL led by its strong brand recall and footprint across segments, asset-light approach, monetization of non-core assets, focus on driving alternate revenue streams, repositioning Ginger in lean luxury segment and efficient costs management. The worst phase for the hotel industry is likely behind. But, revival may be gradual over 15-18 months to hit the historic 65-70% occupancies and Rs 10k+ ARR in our view. That said, we expect the operating performance to improve from hereon led by recovery in occupancies, ARR and the structural cost rationalization benefits.
We have broadly maintained our FY21/22/23E revenue/EBITDA estimates. Reiterate BUY on IHCL with revised TP of Rs 144 @ 20x Dec-22E EV/EBITDA (vs. Rs 133 earlier at 20x Sep-22E) on roll-forward. That said, post the recent run-up and with peak season behind; we expect the IHCL stock to go through a time correction.
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