Shares of ITC Hotels surged by 6 percent on March 28, reaching a new all-time high of Rs 206 per share after global brokerage firm Macquarie initiated coverage with an "outperform" rating and set a target price of Rs 230 per share, indicating a potential 11 percent upside from current levels.
Since its listing on January 29 following the demerger and spin-off from ITC, shares of ITC Hotels have gained 16 percent. Notably, all three analysts tracking the stock have issued a "buy" recommendation.
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Macquarie analysts highlighted that ITC Hotels is India's second-largest domestic lodging company, with a strong presence in Tier-1 markets and a strategic focus on upscale properties.
The brokerage believes that the current valuation gap will gradually close as the company expands its portfolio, strengthens historical financial data, improves market awareness, and optimises its balance sheet.
Macquarie expects a key turning point in free cash flow (FCF), driven by lower capital expenditures, stabilisation of existing assets, and an asset-light expansion strategy. These factors could significantly improve ITC Hotels' Return on Capital Employed (ROCE), which is projected to rise from 8 percent to 14 percent.
Ambit Capital has also assigned a "buy" rating to ITC Hotels, with a target price of Rs 230 per share. The brokerage pointed out that macroeconomic factors remain favorable, and the ongoing hospitality sector upcycle is expected to continue.
Ambit Capital noted that ITC Hotels’ luxury brand portfolio is comparable to Indian Hotels Ltd, given its iconic food and beverage offerings. They also emphasized the company's focus on ramping up owned assets, improving operational efficiency, and expanding through an asset-light model, reinforcing their bullish stance on the stock.
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