Buy Indian Hotel; target of Rs 180: Motilal Oswal

Motilal Oswal's research report on Indian Hotel

In FY18, management contract Hotels formed 32% of the overall portfolio, which has now increased to 46% (including Hotels in the pipeline). IH targets to take it to 50% going forward. About 78% of current pipeline Hotels are under management contracts. As per ‘Aspiration CY22’ announced in CY18, it looked to sign 15 Hotels under management contract annually. However, it added 22/29/17 Hotels in FY19/FY20/FY21. IH recorded the highest number of new Hotel signings and openings in the industry during CY20, with 17 signings and seven new Hotel openings. It generated a revenue of INR2.2b from management contracts, which it intends to take to INR3.5b. It is to be noted that EBITDA flow through in management contract income is 70-80% and that too without deploying capital, thus the said initiative is RoCE accretive.

Outlook

We value the stock at 19x Jun’23E EV/EBITDA and arrive at a SoTP-based TP of INR180. We maintain our Buy rating.

For all recommendations report, click here