03 Feb , 2022 By : Kanchan Joshi
Though the ongoing third COVID wave poses a threat to near-term earnings of the hospitality sector, higher vaccination and lower hospitalization rates will lead to a much stronger rebound than the second wave. Thus, brokerage Motilal Oswal views this weakness as a buying opportunity for Indian Hotel shares.
The domestic brokerage and research firm believes that Indian Hotels' asset-light model as well as the new/reimagined revenue generating avenues with higher EBITDA margins bodes well for RoCE expansion.
Motilal Oswal has maintained its Buy rating on the Tata Group stock Indian Hotels with a target price of Rs265 per share. Shares of Indian Hotels have rallied over 77% in a year's period, whereas, the counter is up nearly 19% in 2022 (year-to-date or YTD) so far.
“Like in FY22, we anticipate a strong recovery in FY23E/FY24E as well on ARR improvement, once the economic activities normalize, improved occupancies driven by business travel as well as leisure segment, cost rationalization efforts, d) an increase in F&B income as banqueting/conferences resume, and higher income from management contracts," the note stated.
At the outset, Motilal notes that Indian Hotels has delivered profits after six consecutive quarters of losses. Th company's revenue/EBITDA for 3QFY22 came in above the brokerage's estimates. Factoring in the same, it has increased its EBITDA estimates for FY22 by 20% and largely retains for FY23 & FY24.
“The higher demand in leisure segment as well as recovery in business travel has driven overall growth. Additionally, IHIN’s operating performance was strong because of operating leverage and cost-saving measures," it further added.
As per the BSE shareholding pattern, Indian ace investor Rakesh Jhunjhunwala and his wife Rekha Jhunjhunwala have 1.08 percent each stake in Indian Hotels as of December 2021 period.
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