Indian Hotels drops 4% on profit booking, rich valuations post strong Q3

Indian Hotels share price: Hospitality industry company Indian Hotels shares declined up to 4.23 per cent on Monday, January 20, 2025, hitting an intraday low of Rs 779.35 per share, amid profit booking. 

 

Earlier in the day, the Indian Hotels share rose as much as 2.60 per cent to hit an intraday high of Rs 835 per share.

 

Chokkalingam G, the founder of Equinomics Research, mentioned that the valuation of Indian Hotels was a little stretched at 43 times enterprise value (EV) to earnings before interest, tax, depreciation and amortisation (Ebitda), which led to a major correction despite the impressive Q3FY25 results. 

 

However, post-correction, Indian Hotels now trades at a more reasonable valuation of around 38x EV to Ebitda for FY2025E. 

 

“While the short-term outlook may not appear favourable, the company holds considerable potential beyond a one-year time frame,” Chokkalingam G added.

 

According to the domestic brokerage Nuvama, Indian Hotels continued to deliver robust Q3FY25 results, driven by strong demand and faster growth in food and beverage (F&B), which also led to double-digit operating expense (opex) growth. 

 

The like-for-like (LFL) growth in FY25E is expected to be in the early teens, aligning with previous expectations. Furthermore, strong demand visibility for Q4FY24, along with a low base effect in Q1FY26, is likely to contribute to continued double-digit growth. 

 

Based on the strong performance in Q3FY25, Nuvama analysts have made slight adjustments to its FY25E and FY26E revenue and Ebitda projections, increasing them by 1 per cent each. This, along with a rollover to FY27E Ebitda, has led to a revised target price (TP) of Rs 628, up from the earlier Rs 574. However, the brokerage maintains a ‘Reduce’ rating, as the stock's valuation has surged ahead of earnings.

 

Indian Hotels’ consolidated profit jumped 28.9 per cent year-on-year (Y-o-Y) to Rs 582.3 crore in the December quarter of financial year 2025 (Q3FY25), from Rs 452 crore in the December quarter of financial year 2024 (Q3FY24).

 

The company’s topline, or revenue from operations, zoomed 29 per cent Y-o-Y to Rs 2,533.1 crore in Q3FY25, from Rs 1,963.8 crore in Q3FY24. 

 

At the operating level, Ebitda climbed 31.3 per cent annually to Rs 961.7 crore in Q3FY25, from Rs 732.4 crore in Q3FY24. Consequently, Ebitda margin expanded 68 basis points Y-o-Y to 37.97 per cent in the December quarter of FY25, from 37.29 per cent in the December quarter of FY24.

 

Meanwhile, analysts at Motilal Oswal stressed that the outlook for Indian Hotels remains strong, supported by healthy traction in the core business and accelerated growth in new and reimagined business segments. 

 

The firm expects the strong momentum to continue in the medium-term, driven by several factors including a rise in average room rates (ARR) due to strong demand, an effective asset management strategy (including hotel upgrades), corporate rate hikes, higher occupancy levels amid favourable demand-supply dynamics, and a strong pipeline for room additions until FY28—comprising both owned/leased hotels (3,564 rooms) and management hotels (14,100 rooms). 

 

Additionally, higher income from management contracts and the potential for value unlocking through scaling up reimagined and new brands, analysts believe, will further support growth. Thus, Motilal Oswal has broadly maintained its FY25, FY26, and FY27 Ebitda estimates and reiterated a ‘Buy’ recommendation, with a sum-of-the-parts (SoTP)-based target price of Rs 960.

 

At 11:42 AM, Indian Hotels share was trading 3.77 per cent lower at Rs 783.15 apiece In comparison, BSE Sensex was trading 0.78 per cent higher at 77,218.15 levels.