Buy Multibagger Midcap Tata Group Stock, Shares Can Give Up To 16% Returns, Says Anand Rathi

Anand Rathi in its recent report on Indian Hotels Company Limited (IHCL)retains "buy" call with a higher target price of Rs 360 per share. The brokerage with the given target price sees a 16% upside in the stock from its current level if the stock is purchased at the current market price. IHCL is a mid-cap Tata Group company in the Tourism & Hospitality sector having a wide presence in the Hotel & Resorts industry. It has a market capitalisation of Rs 44,316.47 crore. Here are the key takeaways from the report:

Stock Outlook & Returns

The share price of IHCL last traded at Rs 312 per share on NSE, down 0.21% from its previous close. The stock's 52 week high is Rs 349 and the 52-week low is Rs 171, respectively. 

The stock has given 9.24% negative returns in 1 week. It has given 14.73% positive returns in 3 months. In a year, it gave 44.28% positive returns.  In 3 years, it gave 101.75% multibagger returns, whereas, in 5 years it gave 178.7% multibagger returns.

Q2 FY23 result update

Revenue was a robust Rs12.33bn (ARe: Rs11.6bn), up 69% y/y, 22.4% from Q2 FY20, largely driven by the strong rebound in ARR. On an enterprise level, occupancy was ~62% (65% in Q2 FY20) with ARR of Rs9,552 (25.9% compared to Q2 FY20). Standalone occupancy was 70% with ARR of Rs11,000, up 26.5% from Q2 FY20. EBITDA came at Rs2.94bn (304%+ y/y, 155% compared to Q2 FY20) with a 23.9% margin (11.4% in Q2 FY20, 10% in Q2 FY22).

Key concall highlights

1. HVS Anarock sees Q3 demand outpacing supply and an 8-10% increase in ARR, and IHCL is seeing similar trends in the last six weeks.
2. For the last six months, rates have been rising globally and are expected to continue an upward trajectory in India too on supply constraints.
3. Almost 10 years ago, the number of branded hotel-room supply was almost equal to branded hotel supply being developed/pipeline. This figure has comes down and is ~40% of the number of branded rooms in operations.

Expect H2 to follow the same strong trend as H1; retaining a Buy

Indian Hotels' ARRs rose further in Q2 FY23 while occupancy was impacted as compared to Q1 due to the normal seasonal nature of the industry. Growth was strong in H1 FY23, and H2 is likely to follow and outperform pre-pandemic levels by a significant margin due to booming demand. "We believe the sector is on an upswing. Rising inbound tourism and a rise in number of government delegations and international conferences augurs well for the sector and IHCL. Factoring in the better than-expected revenue growth, we raise our FY23e/FY24e revenue 8%/6.5% and introduce FY25e. We retain our Buy on the stock, with a higher TP of Rs.360 (earlier Rs.320) on a sum-of-parts basis, valuing it at 22x consolidated FY25e EBITDA," the brokerage has said.

According to the Anand Rathi, the key risks to the buy call are: A slowdown in the economy would curtail demand; vulnerable to external factors such as terrorist attacks, epidemic spread, etc.

Disclaimer

The stock has been picked from the brokerage report of Anand Rathi. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.