ICICI Direct is bullish on Indian Hotels has recommended buy rating on the stock with a target price of Rs 165 in its research report dated August 07, 2019.
ICICI Direct's research report on Indian Hotels
Indian Hotels reported a weak set of Q1FY20 numbers. While domestic network hotels witnessed 4.2% growth YoY, the international business continued its turnaround growing 8.2% YoY. Overall revenues increased 4.1% YoY to Rs 1020 crore (vs. I-direct estimate of Rs 1065 crore) during the quarter. EBITDA on a reported basis was at Rs 173 crore while for a like-to-like comparison, EBITDA was at ~Rs 128 crore (vs. I-direct estimate of Rs 131 crore). Adjusted EBITDA margins for the quarter came in at 12.5%, improving ~120 bps YoY (broadly in line with I-direct estimate of 12.3%). PAT for the quarter was at Rs 5.7 crore. However, the same is also not comparable. On a comparable basis, PAT was at Rs 14 crore for Q1FY20, below I-direct estimates of Rs 22.9 crore on account of higher tax provisions during the quarter.
Despite a weak April and May, the company reported ~4% growth supported by a strong June. With the expected tailwind in the sector, IHCL being the leader, should be a key beneficiary of the turnaround. Additionally focus on cost rationalisation and an asset light focus are strong positive for the company. Considering the above, we maintain our positive stance on the company and reiterate BUY on IHCL with a target price of Rs 165.
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