Buy Indian Hotels; target of Rs 102: ICICIdirect

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26 Aug, 2025 12:21

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ICICIdirect.com`s research report on Indian Hotels Company“Indian Hotels Company, Q1FY15 performance came in below estimates with standalone revenues of Rs 397.8 crore (vs. I-direct estimate: Rs 416 crore). The growth remained flat YoY led by a subdued domestic environment. On the other hand, subsidiary’s revenue grew 5.4% YoY to Rs 539.7 crore, leading to overall consolidated revenue growth of 3.2% YoY to Rs 937.5 crore. Lower operating margins along with forex loss of Rs 4.6 crore led to net loss of Rs 7.1 crore for the quarter vs. profit of Rs 9.8 crore last year. Further, subsidiaries net loss remained flat YoY at Rs27.7 crore leading to consolidated net loss of Rs 34.8 crore for the quarter.” “The company’s debt position eroded sharply from Rs 2055 crore in FY07 to Rs 4647 crore in FY09 due to major expansion in the US. Indian Hotels has since then taken steps to reduce their debt by raising money through rights issue and preferential allotment of shares. Currently, the company's debt stands at Rs 3323 crore for FY14 of which debt worth Rs 553 crore is maturing in FY15. IHCL has once again come out with a rights issue amounting to Rs 1000 crore to repay the debt and for room expansion. Apart from fund raising, the company is also planning to hive off assets in strategically unimportant geographies to reduce its debt. Last year, the company put its Australia property Sydney Blue for sale, though the deal has not materialised yet. Subsidiaries currently contribute over 53% of total revenue (FY14) whereas their contribution in EBITDA is ~30% due to low operating margins (i.e. at 8.0% as against standalone margin of 20.2% in FY14). While we have seen a marginal expansion of subsidiary companies for FY14 (up 90 bps YoY), we believe the continued good performance of subsidiaries in the US and UK remains a key attribute to improve the overall performance of the company, going ahead.” “At the CMP of Rs 83, the stock is trading at 14.9x and 12.5x its FY15E and FY16E EV/EBITDA, respectively. With no further major impairment, we expect the balance sheet strength to improve coupled with pick-up in demand, going forward. In terms of earnings, we expect sales CAGR of 8.0% during FY14-16E with improved margins. We have valued the stock at 14.5x FY16E EBITDA (i.e. at Rs 1.4 crore/room and 3.0x FY16E book value) and arrived at adjusted target price of Rs102/share (ex-rights) with BUY rating on the stock,” says ICICIdirect.com research report.  

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