ICICI Direct is bullish on Indian Hotels recommended buy rating on the stock with a target price of Rs 160 in its research report dated May 28, 2018.
ICICI Direct's research report on Indian Hotels
Indian Hotels reported a good set of Q4FY18 numbers. The results were above our estimates on all front Consolidated revenues increased 8.7% YoY to | 1,143.5 crore (vs I-direct estimate of | 1,107.0 crore) mainly led by 10.8% YoY increase in domestic revenues EBITDA margin increased 451 bps YoY to 21.4% (vs. I-direct estimate of 20.4%) led by 478 bps YoY increase in domestic EBITDA margins to 32.5%. The company has recommended a dividend of 0.4/share.
The domestic hotel industry is expected to witness robust growth in coming years led by higher occupancy, limited capacity addition and rise in spending by domestic travellers. Indian Hotels, one of the largest domestic hotel players, will be a key beneficiary of a turnaround in the industry. In addition, the company plans to add 20 new hotels in India through management contracts that will further boost topline. In addition, cost rationalisation and RevPAR growth are expected to drive margins in FY18-20E. Further, divestment or turnaround of loss making international subsidiaries and debt reduction remain key positive triggers for the long term. Hence, we have a positive view on the stock. We maintain BUY recommendation on the stock with a revised target price of | 160/share (i.e. valuing at EV/room of | 2.5 crore/room).
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