Indian Hotels' Q4 EBITDA misses estimates, but brokerages are optimistic about the country's robust demand prospects

Indian Hotels' Q4 EBITDA misses estimates, but brokerages are optimistic about the country's robust demand prospects

Managing director and CEO Puneet Chhatwal said that IHCL would continue to generate double-digit revenue growth with new companies at a rate of 30% and the launch of 25 properties.

Over the last year, the share price of Indian Hotels Company has increased by over 76%, surpassing the performance of the benchmark Nifty 50, which has increased by 25% over the same time frame.

A day after Indian Hotels Company announced in-line profits for the March quarter while missing EBITDA projections, the hotel chain's shares dipped more than 2 percent early on April 25.

Strong revenue per available room (RevPAR) increase contributed to the Tata Group company's net profit rising 27.43 percent year over year to Rs 418 crore and revenue rising 18 percent YoY to Rs 1,951 crore.

Although the company's US operations continue to be sluggish, its subsidiary performance is generally strong and consistent. Given the company's development ambitions, the expectation for leisure demand, the upcoming wedding season, and a supportive market, analysts have continued to have a constructive perspective on the stock.

IHCL shares were down 1.6% at Rs 597.95 on the National Stock Exchange at 9:34 a.m. The share price of Indian Hotels has increased by nearly 76% in the last year, well above the benchmark Nifty 50's 25% increases.

Meeting the increasing need  

According to Taj hotel operator, Indian hotels have maintained their industry-leading RevPAR, with a 65 percent advantage over the competition on a pan-Indian basis. In FY25, it wants to build 25 hotels.

Currently, capital-light enterprises account for 14% of the company's consolidated revenue; this percentage is predicted to increase to 20% soon. Experts predict that demand will rise by 10.6 percent every year, while supply will keep up with demand.

The hotel industry is happily heading towards a faster-than-expected complete recovery in FY23 and a record Q1FY24, according to Nuvama analysts, who also ascribed Indian Hotels' good profitability.

A robust wedding season and persistent domestic leisure travel demand in the first half of FY23, together with the possibility of a complete recovery for foreign business and leisure travel in the second half, have propelled the recovery. The business claimed to have "stronger immediate triggers—a buoyant Mumbai market, wedding season, and leisure demand."

Nuvama maintained its "hold" recommendation (with a target price of Rs 578) on the IHCL shares. The brokerage said that the main risks associated with the stock include any earlier-than-expected recovery in the sector or the sale of non-core assets to reduce debt.

In contrast, Morgan Stanley rates Indian Hotels as "overweight" and has set a target price of Rs 529 per share.

IHCL said that the core business is still on track even if its fourth-quarter EBITDA was about 5–6% below both estimations and Bloomberg consensus predictions.

The primary cause of the profits loss was the overseas subsidiaries' lower-than-expected performance. However, in its primary markets, Indian hotels continue to have steady demand growth and restrained supply expansion. Morgan Stanley said that it is still optimistic on the stock due to the company's multi-brand portfolio and robust free cash flow.

Motilal Oswal anticipates that the robust momentum in Indian hotels will continue in FY25, driven by improved ARR as a result of robust demand, asset management strategy (hotel improvements), corporate rate rises, and maintaining higher occupancy levels as a result of favorable demand-supply dynamics.

It said that strong room addition pipelines through FY28 in both owned/leased and managed hotels, increased revenue from management agreements, and value unlocking via scaling up redesigned and new brands would all help to drive growth.

The brokerage anticipates that the hotel sector will continue to develop, with demand growth across all of India expected to reach 10.6% between FY24 and FY27. With a target price of Rs 680 based on SoTP, it restated its "buy" recommendation on the shares.