Nomura initiates coverage on ITC Hotels with 'Buy,' sees 20% upside

Japan-based brokerage Nomura has initiated coverage on ITC Hotels Ltd. with a ‘Buy’ rating and a target price of ₹230, implying about 20 per cent upside from current levels. 

 

The brokerage expects robust margin improvement, strong cash generation and healthy growth in the company’s managed hotels pipeline to drive earnings over the medium term.

 

In its initiation note dated January 13, 2026, Nomura said ITC Hotels offers visibility on high single-digit growth in revenue per available room (RevPAR), led by resilient average room rate (ARR) growth and improving occupancy at recently commissioned properties. As these assets mature, RevPAR-led operating leverage is expected to translate into meaningful margin expansion, helping the company narrow the profitability gap with peers in the luxury hospitality segment.

 

 

Nomura also flagged scope for improvement in return on invested capital (ROIC), which remains suppressed due to recent capital-intensive expansions. ROIC is expected to improve as ITC Hotels increasingly adds rooms through its asset-light managed model and as overseas assets, particularly ITC Ratnadipa and Sapphire Residences in Sri Lanka, gain traction.  ALSO READ | Axis Bank surges 4%, stock nears record high; brokerages see more upside 

Overall, Nomura estimates consolidated revenue and Ebitda CAGRs of 15 per cent and 18 per cent, respectively, over FY25-FY28. The brokerage expects annual cash generation of ₹800-1,000 crore during this period, providing ITC Hotels with flexibility to pursue inorganic growth opportunities.

 

The target price of ₹230 is based on 23x FY28F EV/Ebitda, a 10 per cent discount to Indian Hotels Company Ltd. (IHCL), which Nomura values at 26x FY28F EV/Ebitda. ITC Hotels is currently trading at around 23x FY27F EV/Ebitda, close to the lower end of its historical trading band of 22-32x.

 

Nomura highlighted that ITC Hotels has historically opened around one self-owned hotel per year over the past decade, with nearly 20 per cent of owned keys added in the last five years. Newer hotels currently operate at sub-70 per cent blended occupancy, compared with around 78 per cent for IHCL, offering scope for occupancy-led upside over the next three to five years.  ALSO READ | Nomura initiates Buy on Indian Hotels; cites ADR growth, asset-light model 

On the asset-light front, ITC Hotels operates 146 hotels with 13,500 keys and has a pipeline of 61 hotels with 5,900 keys. Over 90 per cent of upcoming additions are expected to be through the management fee route, pushing the managed portfolio share to around 70 per cent from about 60 per cent currently. Nomura expects management fee income to grow at a 20 per cent CAGR over FY25-FY30.

 

Key risks to the thesis, analysts said, include slower-than-expected ARR growth and delays in portfolio expansion.    Disclaimer: The views or investment tips expressed by the brokerage in this article are their own and not those of the website or its management. Business Standard advises users to check with certified experts before taking any investment decisions.