Stellar FY24; room pipeline to drive earnings growth over medium term
Indian Hotels’ (IHCL) FY24 annual report highlights the benefits that it has derived from the hotel industry’s tailwinds and the company’s strong pan-India brand-scape. IHCL clocked consol. Revenue/EBITDA growth of 16.5%/19.5% in FY24. Heading into FY25, incremental growth will likely stem from a heathy room pipeline of 12,953 rooms over FY24– 28E vs. 24,136 operational keys, as of Mar’24. We introduce FY27 estimates, building-in FY24–27E revenue/EBITDA CAGRs of 14%/18% and 8–10% annual EBITDA growth from its existing assets, while commencement of new hotels adds to this. With the stock price correcting ~10% in the last three months, we upgrade IHCL to BUY, from Hold, with a SoTP-based revised TP of INR640 (earlier INR617), rolling forward to 26x Jun’26E EV/EBITDA. Key risks: Demand slowdown and slower ARR growth.
Another stellar year driven by growth across segments
After two years of disruption between FY21–22 owing to Covid-19, FY23 marked the first year of the Indian hotel industry along with IHCL convalescing with no further disruptions. This reflected in IHCL’s FY23 performance. Momentum has sustained in FY24 as well with consolidated revenue growth of 16.5% and EBITDA growth of 19.5% during the year. Standalone in FY24, revenue/EBITDA swelled 19% YoY/23% YoY to INR 44bn/INR 17.1bn, as EBITDA margins expanded 140bps YoY to 38.9%. Among its domestic subsidiaries, Roots Corporation Ltd (Ginger) saw FY24 revenue rising 22% over FY23 levels with FY24 EBITDA of INR 1.3bn (up 18% YoY) at an EBITDA margin of 36%. While other domestic subsidiaries such as PIEM/Benares/ United Hotels clocked decent YoY revenue and EBITDA growth in FY24, its international subsidiaries were a mixed bag with St. James Court (UK) seeing YoY revenue/EBITDA growth of 18%/43% in FY24 while the UOH Inc. (USA) saw flattish YoY revenue with an EBITDA loss of INR 0.6bn.
Demand outlook remains promising
Management notes that occupancy and room rates seen in FY24 point to RevPAR growth likely staying healthy in FY25 too. With industry forecasts suggesting double-digit demand CAGR over FY24–28E vs. supply CAGR of 7– 8%, IHCL feels that ARR trajectory is northbound in the medium term. Hence, it remains confident of double-digit consol. revenue growth in FY25 with new businesses expected to grow >30% YoY alongside asset management driving profitability via a mix of premiumisation of offerings and optimisation of costs.
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