In-line quarter, outperformance to continue
Summary
IHCL reported yet another healthy quarterly results which were in-line with our expectations. The management reiterated that the current upcycle in Indian hospitality is structural which is supported by sustained growth in domestic travel, MICE, weddings, spiritual tourism and premiumisation, with demand continuing to outpace supply in key markets. Further, supply additions remain calibrated across major cities and leisure destinations, supporting sustained pricing power and healthy RevPAR growth. The company guided for 12–14% revenue growth in Q4FY26 and reiterated confidence in delivering double-digit revenue growth in FY27, driven by RevPAR growth, new hotel openings and ancillary revenues. New business verticals, including Ginger, Qmin, Ama and Tree of Life, are expected to deliver 25%+ revenue growth, supported by scale benefits and integration of recent acquisitions. We roll over to FY28E and reiterate BUY with a TP of Rs877, assigning 28x EV/EBITDA to FY28E.
Key Highlights and Investment Rationale
Healthy RevPAR growth aided earnings momentum: IHCL reported yet another strong quarterly performance driven by strong like-for-like performance, ARR-led RevPAR growth and contribution from new business verticals. The hotel segment’s revenue stood at Rs28.4bn witnessing a growth of 12.2%. Prudent cost optimization measures supported EBITDA to grow at 11.9% over Q3FY25. Net before exceptional items grew by 7.3% YoY. Overall RevPAR grew ~9% YoY during the quarter, largely driven by ~7% ARR growth, with Taj at ~8%, Vivanta/Selections/Gateway at ~10%, and Ginger at ~9%.
Positive industry dynamics to drive healthy earnings growth: We have been positive on IHCL in domestic hospitality space given its superior revenue growth outlook, cost optimization measures, increasing contribution of new initiatives in net sales as well as EBITDA and healthy balance sheet. We anticipate healthy double digit net sales growth and operating margin expansion in near term. BUY with a TP of Rs877.
