IHCL stock zoomed 42% in one month; here's what brokerages say

Shares of Indian Hotels Company Ltd. (IHCL), which operates the Taj Group of Hotels, rose 6 percent to an all-time high of Rs 218.90 on the BSE on Tuesday. Hotel stocks are in focus as the industry reports a rapid recovery in room occupancies ahead of the festive season.

In the last one month, the IHCL stock has gained 42 percent from Rs 154 on September 13 to nearly Rs 219 at the close of markets today. And since the start of the year, it has gained 78 percent. The shares stand higher than 5-day, 10-day, 20-day, 50-day, 100-day, and 200-day moving averages. IHCL's market cap also increased to Rs 25,438.24 crore.

ICICI Direct noted that the company is witnessing strong traction in room demand in leisure destinations. Revenue per occupied room (RevPAR) in some places has already crossed pre-pandemic levels, reflecting the return of travel. Additionally, the average length of stay in IHCL properties has also climbed to 5-7 days compared to 2-4 days earlier.

"We expect a healthy CAGR of 62.9 percent in revenue in FY21-23E. Expect business to recover to 93 percent of pre-COVID levels in FY23E, with EBITDA surpassing pre-Covid levels in FY23. Margins are seen at over 24 pERCENT in FY23E, and it has the potential to further expand to over 30 percent, improve cash flows, equity infusion, and divestment of non-core assets to help manage debt at comfortable levels," the brokerage said in its report.

"The balance sheet provides strong levers to growth, while efficient operations would drive healthy margin expansion. We value IHCL at Rs 240 or 31X FY23E EV/EBITDA," it added.

In a separate report, Motiwal Oswal shared, "We expect a gradual/sharp recovery in FY22E/FY23E on a low base, improvement in ARR once things normalise, improved occupancies, positivity in cost rationalisation efforts in FY21, an increase in F&B income as banqueting/conferences resume, and higher income from management contracts."
 
IHCL also saw increased demand due to the growth of 'staycations' in Tier I and Tier II cities. "This trend is expected to continue further, as the company saw a higher occupancy rate, followed by an increase in average [stay] rates. Revenge tourism has led to an increase in 'staycation' bookings in metros. A similar trend is expected to continue in the medium-term," Motilal Oswal stated.
 
It added, "Faster demand revival in the 'Leisure Travel' segment has aided the company's performance in FY21. The industry is expected to project accelerated growth in 2HFY22 across domestic and international hotels."

 
IHCL posted a consolidated net loss of Rs 270.05 crore in Q1 FY22 compared to Rs 266.93 crore in Q1 FY21. Net sales were up 139.9 percent year-on-year to Rs 344.55 crore in Q1 FY22.