Indian Hotels stock soars 8% on heavy volumes on healthy growth outlook

The average trading volumes at the counter jumped over eight-fold, with a combined 18.6 million shares representing 1.3% of total equity of IHCL changing hands on the NSE and BSE till 01:45 PM.

Shares of Indian Hotels Company (IHCL) rallied 8 per cent to Rs 625.30 on the BSE in Monday’s intra-day trade on the back of heavy volumes in an otherwise subdued market owing to healthy growth outlook. The stock of Tata Group company had hit a record high of Rs 663.40 on June 26.

The average trading volumes at the counter jumped over eight-fold, with a combined 18.6 million shares representing 1.3 per cent of total equity of IHCL changing hands on the NSE and BSE till 01:45 pm. In comparison, the BSE Sensex was down 0.07 per cent at 80,551.

 

IHCL reported a consolidated strong financial performance for the first quarter ended June 2024 (Q1FY25) with an all -time high revenue of Rs 1,596 crore and healthy earnings before interest, taxes, depreciation, and amortization (EBITDA) margin of 31 per cent. On a year-on-year (YoY) basis, revenue grew 5 per cent, while EBITDA margin improved 0.7 bps. Profit after tax rose 12 per cent YoY at Rs 248 crore.

However, IHCL’s Q1FY25 consolidated revenue growth was slower than that in previous quarters, impacted by multiple headwinds, given General Elections, fewer wedding days, and heat wave.

With demand continuing to outpace supply and favourable structural tailwinds, the management said the sector is set to clock strong revenue growth in the quarters ahead. Despite a weak start to the year, the management is confident of reporting double-digit revenue growth in FY25.

Analysts at Motilal Oswal Financial Services expect the strong momentum to continue in FY25, led by an increase in ARR due to healthy demand, asset management strategy (upgrades in hotels), and corporate rate hikes; sustaining higher occupancy levels led by favorable demand-supply dynamics; strong room addition pipeline till FY28 in both owned/leased (2,898 rooms) and management hotels (11,618); higher income from management contracts; and value unlocking by scaling up reimagined and new brands. The brokerage firm said it broadly maintains its FY25/FY26 EBITDA estimates and reiterated 'Buy' on the stock with a SoTP-based target price of Rs 665 per share.

After a subdued Q1, July 2024 has seen a growth of 20 per cent YoY and August 2024 is also seeing a good trend. Though Q2 is typically weaker than Q1, management expects Q2 to be stronger than Q1, in FY25. Also, growth in Q1 was impacted by lesser MICE (Meetings, Incentives, Conferences and Exhibitions or Events) revenue due to lower number of weddings. Occupancy for cities like Mumbai, Delhi, and Goa was >80 per cent; for Bengaluru, Kolkata, and Chennai, it was between 75 per cent and 80 per cent, whereas it was weaker for cities in Rajasthan, analysts at Emkay Global Financial Services said.

The brokerage firm said long-term tailwinds are intact for the industry, with supply continuing to lag demand. In upcoming years, demand is expected to grow 10 per cent, while supply should increase 6 per cent. Customers still continue to spend on leisure. 

IHCL will now consolidate Taj SATS as a subsidiary, effective 1st August 2024. Taj SATS continues with its market leadership of 59 per cent, with EBITDA margin of 24 per cent. The company has ventured into the new segment of Taj branded residences, with the first to be opened in Chennai. For this, the company will receive brand fee while providing services to apartment owners. This helps it diversify its revenue streams and leverage the strong brand equity of Taj, analysts said. The stock, however, was trading above the brokerage firm’s target price of Rs 615 per share.

IHCL and its subsidiaries bring together a group of brands and businesses that offer a fusion of warm Indian hospitality and world-class service. These include Taj - the iconic brand for the most discerning travelers; SeleQtions, a named collection of hotels; Vivanta, sophisticated upscale hotels; and Ginger, which is revolutionising the lean luxe segment. IHCL has a portfolio of 326 hotels including 102 under development globally across 4 continents, 13 countries and in over 130 locations.