The stock of Tata Group Company surpassed its previous one-year high of Rs 156 touched on April 24, 2018 in the intra-day trade. It is 3 per cent away from its all-time high of Rs 161 hit on January 23, last year on the BSE. Indian Hotels is the largest playe in the hospitality sector in India, with inventory of over 17,000 rooms.
In the past one month, after October-December 2018 (Q3FY19) results, Indian Hotels beat the market by surging 15 per cent after reporting a double-digit growth in revenues, robust increase in Ebitda (earnings before interest, taxation, depreciation and ammortisation) margins of 150 bps and a net profit growth of 50 per cent over the previous year quarter. In comparison, the S&P BSE Sensex was up 4 per cent during the same period.
Q3FY19 was the third consecutive quarter of strong results in the current financial year which was an outcome of increase in revenues and leveraging operational efficiencies; while maintaining a healthy growth in average room rates (ARR) over the market, Indian Hotels said.
Indian Hotels rebranded and relaunched the Ginger Goa hotel in December 2018, post which the ARR has increased by 30-40 per cent; Ebitda margin is also likely to improve as costs have not increased proportionally. In FY20, the company plans to rebrand 14 Ginger hotels.
Analysts at JP Morgan have ‘overweight’ rating on the stock with the target price of Rs 160. The brokerage firm believes market demand-supply dynamics will be favorable for the hotel industry until 2021 and the hotel cycle will enter a mid-cycle over FY19/20 indicating the scope for revenue per available room (RevPAR) improvement across domestic markets. Given the imputed leverage both in operations and financials, consequent improvements in earnings could be significant, they say.
“In our view, Indian Hotels is well on track to achieve its ‘Aspiration 2022’ goal and other strategic initiatives like rebranding of Ginger/monetising the existing landbank. Moreover, Indian Hotels is witnessing average room rate (ARR) growth of 8 per cent in the FIT segment and has taken an ARR hike of 8.5 per cent in the corporate segment in Jan’19. Thus, the underlying thesis of favorable demand-supply-led growth in the Indian hospitality industry remains intact,” Motilal Oswal Securities said in company update with the target price of Rs 189 per share.