Strong Q3; Momentum to continue into Q4
About the stock: ITC Hotels, established in 1975, is the second largest hotel company in India with 14,070 keys in 90+ destinations.
Q3FY26 performance: Consolidated revenues (ex-residential) grew by 14% YoY to Rs1,142.8cr. Standalone revenues reported 13% YoY growth to Rs.1046.7cr. Domestic RevPAR growth reported 12% YoY growth to Rs.11200/night while ITC Ratnadipa, Sri Lanka continued its strong performance with RevPAR scaling to 1.4x YoY and turned EBITDA positive on YTD basis. EBITDA margins (ex-residential) improved 80bps YoY to 38.3% in Q3FY26. Robust revenues, higher other income aided 29% YoY growth in Adjusted PAT (ex-residential) to Rs.280cr.
Investment Rationale:
• Strong performance (ex-residential), aided by improving occupancy and steady ARR growth: Domestic RevPAR grew 12% YoY to Rs.11,200/night, aided by higher occupancy at 75% (+290bps YoY) and high-single digit ADR growth (+9% YoY). As per our calculations, Room revenues grew 13% YoY to Rs.544cr, while F&B revenues grew 8% YoY to Rs.411cr. ITC-Ratnadipa posted 1.4x YoY RevPAR growth and turned EBITDA-positive on a YTD basis. We expect events such as the ICC Cricket T20 World Cup in Feb,26 (in India & Sri Lanka) to support occupancy and ADR in Q4FY26. Overall revenues (ex-residential) to grow by ~13% YoY in FY26. Steady Domestic RevPar growth, uptick in Ratnadipa occupancies and room additions/renovation will lead to revenue CAGR of 14% over FY25-28E.
• Focus on room expansion continues; Yashobhoomi hotel to further enhance presence in MICE segment: ITC Hotels continues to focus on capital-efficient expansion, with a portfolio of 213 hotels and 20,222 rooms, of which 152 hotels with 14,070 rooms are operational and 61 hotels with 6,152 rooms are in the pipeline. Of the pipeline, 59 managed hotels with ~5,500 keys highlight the company’s asset-light and capitalefficient growth strategy. The 2 greenfield projects in Puri and Vizag, expected to be operational in 2027 and 2029 while the planned premium hotel at Yashobhoomi, New Delhi (by 2030) should benefit from strong MICE-led footfalls. Recent renovation of 334 rooms is expected to support growth in ADR leading to robust revenue growth in the upcoming quarters.
• Core EBIDTA margins to improve further aided by double-digit RevPAR growth and ITC Ratnadipa: ITC Hotels’ consolidated EBITDA margins (exresidential) improved by 80 bps YoY to 38% in Q3FY26 and by 190 bps YoY to 33.2% in 9MFY26, driven by strong room and F&B revenue growth along with cost control initiatives. ITC Ratnadipa turned EBITDA-positive with improved profitability on a YTD basis. Ongoing renovations are expected to further support higher ARR and margins, while double-digit domestic RevPAR growth and scale-up at ITC Ratnadipa, Sri Lanka expected to drive further margin improvement. Higher F&B and MICE contribution is likely to continue aiding margin expansion in the near term.
Rating and Target Price: ITC Hotels registered resilient performance in Q3FY26 aided by strong wedding, MICE and corporate segment. We expect steady growth momentum to sustain on back of favourable industry tailwind. We maintain Buy with a SoTP based revised price target of Rs.240.
