Hotel stocks on a roll; Indian Hotels, Chalet, EIH surge over 10%

Easing of travel related restrictions, coupled with pent-up vacation demand, seems to the driving force behind a sharp surge in hotel shares

Shares of hotels companies were on a roll and rallied by up to 15 per cent on the BSE in Tuesday’s intra-day trade on hopes of business revival on pent-up vacation plans, as travel related restrictions ease. 

Among the individual stocks, Indian Hotels Company (IHCL), EIH, Chalet Hotels and Lemon Tree Hotels rallied between 10 per cent and 15 per cent in intra-day trade today. Westlife Development, which runs McDonald’s restaurants in western and southern India, Taj GVK Hotels & Resorts and Speciality Restaurants were up in the range of 5 per cent to 9 per cent on the BSE. In comparison, the S&P BSE Sensex was up 0.03 per cent at 60,063 points at 12:30 pm.

ICHL hit a new high of Rs 200.90, surging 12 per cent on back of heavy volumes. The trading volumes at the counter nearly doubled with a combined 28.11 million equity shares changing hands on the NSE and BSE. So far in September, the stock of Tata Group company has zoomed 43 per cent, as compared to 4.4 per cent rise in the S&P BSE Sensex.

IHCL is set to post its sharpest monthly gain in over two decades. Earlier, in August 2021, the stock had rallied 35.7 per cent. The previous single-month record gain was way back in August 1999, when the stock had zoomed 52 per cent in a single month.

Last month, IHCL had announced Rs 3,000 crore fund raising plans by way of a rights issue to the existing shareholders of the company. The objective of the issue is to meet the company's financing needs for capital expenditure, growth plans and debt repayment & will be finalised in consultation with the merchant bankers, the company said.

Meanwhile, the brokerage firm IDBI Capital initiated coverage on Chalet Hotels with a BUY rating and target price of Rs 295, valuing hotels business at 17x EV/EBITDA and capitalization rate of 8.3 per cent on retail– commercial properties on FY24E.

“We like Chalet in domestic hospitality space considering strong positioning in high-end branded hotels in key business cities, well positioned to benefit from post pandemic industry revival, active asset management of the properties,  new hotels and commercial properties to strengthen earnings growth, hotel-led complimentary mixed-use of real estate to drive operating margin expansion, value unlocking opportunities in Koramangla project and inorganic growth opportunities, the brokerage firm said in a report.