This Tata group hotel stock has zoomed 100% in one year

Shares of Indian Hotels Company hit a new high of Rs 602.75, up 4% on the BSE in Friday's intra-day trade

Shares of Indian Hotels Company (IHCL) hit a new high of Rs 602.75, up 4 per cent on the BSE in Friday's intraday trade, in an otherwise range-bound market, on healthy business outlook. In comparison, the S&P BSE Sensex was up 0.09 per cent at 73,224 at 10:48 AM.

The stock of the Tata group company was quoting higher for a sixth straight trading day and has rallied 14 per cent during the period. In the past one month, Indian Hotels has outperformed the market by surging 28 per cent as compared to 4 per cent rise in the Sensex. Further, in the past one year, it has been doubled from a level of Rs 300, as against nearly 23 per cent rally in the benchmark index.

IHCL continue to command the premium over the industry across all operating metrics and has delivered robust performance across its brands. With the demonstrated Revenue per available room (RevPAR) growth year-on-year (Y-o-Y) in the range of 12 per cent to 15 per cent, the management expects double-digit revenue growth to continue in the next financial year as well. The growth will be driven by three key dimensions of growth namely, growth in portfolio, growth in new brands, and businesses and growth in traditional business, enabled by effective asset management.

IHCL's flagship Ginger Mumbai Airport is now open and had a stellar debut with an average occupancy of 80 per cent and an average rate of over Rs 6,500. According to the management, the hotel has been reporting profit before tax (PBT) from the very first month of operation. The company will maintain the space and is well placed to open at least 20 hotels in the current financial year ‘23-24 (FY24).

"The company has already opened 16 properties, and expects to open four more in the month of February and March. This is in line with the guidance that the company has provided. Going forward, in ‘24-25 (FY25), with 85 hotels in pipeline, the pace of openings is only going to increase. The company targets to open on an average two or more hotels every month," the management said.

The company’s strong footprint across (over 130) locations makes it very well placed to capitalise on the sustained demand up-cycle that the sector is witnessing.

IHCL will open a hotel in Ayodhya in less than 12 months. It is a brownfield site where third floor construction has already been completed. It is also looking at large home stay opportunities in Ayodhya.

IHCL's unmatched pan-India coverage, comprehensive presence across all customer segments, vastly improved brand architecture and sharper focus on capital allocation is yielding results with a positive flow-through into earnings, analysts at JM Financial Institutional Securities said. Currently, the stock is trading above the brokerage firm's target price of Rs 555 per share.

Hotel industry is likely to sustain the healthy traction in March quarter (Q4FY24) as well, with some of the major hotel companies indicating the continuation of a healthy demand scenario seen in Jan/Feb’24.

Motilal Oswal Financial Services believes that growth in FY25 will be driven by favorable demand-supply dynamics in the industry and several demand catalysts, including the opening of new convention centers in NCR and Mumbai, spiritual and religious tourism, increase in weddings (MICE), improved connectivity, and an expected rebound in foreign tourist arrivals. Accordingly, ARR and OR should continue to increase, which will boost RevPAR, the brokerage firm said in a sector report.