Calling the demerger of ITC's hotels business as win-win for ITC shareholders, ICICIdirect in a fresh note suggested a potential target price of Rs 195 for ITC Hotels shares, an upside of 15-30 per cent over its expected listing price of Rs 150-170 apiece. The brokerage finds ITC shares worth Rs 555.
Ex-demerger, ITC’s stock price would get adjusted by Rs 12-15 per share, the brokerage said adding that focus on driving core will help improve the earning and return profile of ITC in the long run. It recommended 'Buy' rating on ITC.
ICICIdirect, which sees ITC Hotels likely in February, said the demerged hotel business will continue to follow asset right strategy to achieve the next league of growth. It sees revenues and Ebitda for the business to grow at CAGR of 14 per cent and 18 per cent over FY24-27.
ITC will provide institutional support in the form of brand, governance and access to synergies. Strong debt free balance sheet and cash flows will help business to raise capital for the growth in the coming years, it said.
"On the other hand, return profile of ITC (excluding the hotel business) will improve substantially post the demerger. Favourable cross-synergies will be created for FMCG business (including food and personal care). Structure also provides opportunity to exit from the hotel business if it is not part of respective investment strategy," it said.
As per the demerger scheme, eligible shareholders would receive one share of ITC Hotels for every 10 shares hold in ITC -- effective record date is January 6. ITC would still have 40 per cent stake ITC Hotels while the remaining 60 per cent will be held by ITC’s shareholders, with the post demerger equity capital at Rs 208 crore.
"ITC Hotels is India's 2nd-largest hotels entity with 140 properties (vs 232/23/112 for Indian Hotels, EIH, Lemon Tree). As per our proforma P&L, we estimate ITC Hotels' stock value at Rs 150 per share based on FY26E EV/Ebitda of 25 times," Systematix said in a note.
Systematix estimates ITC stock price to adjust by Rs 5 per share as on the record date. "We currently maintain HOLD rating on ITC with target price of Rs 500, and will review our estimates post detailed disclosures by the company. Stock trades at P/E of 26 times/23 times FY26E/FY27E EPS," Systematix said.
According to Nuvama, the adjustment is expected to be Rs 18 per share. "In addition, based on discussions with multiple market participants, we anticipate that the initial market price for ITC Hotels shares will range between Rs 150-175 per share," Nuvama said.
Antique Stock broking finds ITC worth Rs 563.