JM Financial initiates coverage on ITC Hotels, sees 12% downside: Check why

JM Financial highlighted that ITC Hotels has delivered a 22 per cent CAGR in Ebitda over FY23-25, driven by strong RevPAR growth

ITC Hotels share price today: Shares of ITC Hotels fell around 2 per cent to hit an intraday low of ₹240.3 on Monday after domestic brokerage firm JM Financial initiated coverage on the stock with a 'Sell' rating, citing stretched valuations and restricted near-term growth. 

 

JM Financial stated that ITC Hotels has evolved into an industry leader with around 140 properties and 13,500 keys, enjoying a distinct positioning with nearly 60 per cent of its inventory in the luxury segment. 

 

At 1:20 PM, the ITC Hotels stock was trading at ₹244, down 0.35 per cent from its previous day's close of ₹244.8 on the NSE. In comparison, the benchmark NSE Nifty50 was trading higher by 123.15 points or 0.5 per cent at 24,993.45 levels. The company's market capitalisation stood at ₹50,753.75 crore. The stock is down nearly 6.5 per cent from its 52-week high of ₹261.62 touched on July 21, 2025.  CATCH STOCK MARKET LATEST UPDATES LIVE 

The brokerage highlighted that the company has delivered a 22 per cent compound annual growth rate (CAGR) in earnings before interest, tax, depreciation and amortisation (Ebitda) over FY23-25, driven by strong RevPAR growth, but cautioned that "growth remains restricted with no new asset getting commissioned till FY28E."

 

“We expect it to report 11/13 per cent CAGR in revenue and Ebitda over FY25-28E, aided by 7 per cent growth in ADR and ramp-up of the Sri Lanka asset,” the brokerage said. However, it added that at current valuations of around 30x FY27 earnings, such growth is already priced in.

 

According to JM Financial, ITC Hotels' strong portfolio of 5,500 owned keys and its shift to an 'asset-right' strategy allow expansion into tier 2 and tier 3 cities, optimising capital allocation. 

 

In addition, the company has a pipeline to expand its footprint to over 200 hotels and around 20,000 keys by 2,030. Its fee business is expected to grow at a CAGR of 16 per cent over FY25-FY28.   ALSO READ | ACME Solar rises 7% as board to consider fundraise on 27 August 

JM Financial also said that ITC Hotels has a strong debt-free balance sheet with a net cash position of ₹17 billion. "We expect the company to generate cumulative free cash flow (FCF) of ₹25 billion over FY26E-28E, which positions it well to fund the planned expansion and also undertake inorganic opportunities.

 

However, the brokerage warned that compared to peers, the overall growth profile of ITC Hotels is restricted on account of healthy occupancy at the portfolio level at 73 per cent and a lack of any new hotel commissioning in the near term (except Sri Lanka). Over FY25-28E, Ebitda and PAT are estimated to grow at 13 per cent / 17 per cent CAGR. 

 

JM Financial has valued the company at 25x its June 2027 Ebitda, which is at a 15 per cent discount to Indian Hotels' target multiple.