Best play with consistent growth
The Indian hospitality industry is on the cusp of a long-term structural growth story with room demand expected to stay ahead of room supply led by rising demand from domestic travellers, emergence of new tourism segments and India becoming one of the better names in global tourism along with strong support from the government in the form of improved infrastructure and favourable policies. Indian Hotels Company Ltd (IHCL) remains a best play in the structural growth story, with the implementation of strong growth strategies, strengthening balance sheet and improving its business model with efficient capital allocation plans. We expect FY2024 to be another strong year after a sturdy FY2023 with high-teens revenue growth and EBIDTA margins standing at ~32% driven by double-digit RevPAR growth. Consistent growth in domestic air travel and high demand from domestic tourism will lead to double-digit room demand growth ahead of room supply. This will help IHCL to post another year of strong performance in FY2025 with revenues and PAT expected to grow by 16% and 26% y-o-y, respectively.
View – Retain Buy with a revised PT of Rs. 679: IHCL has charted a strong growth plan to be achieved by FY2025-26 with a strong improvement in cash flows and strengthening balance sheet with a focus on becoming debt-free. EBITDA margins will consistently improve in coming years. With strong room inventory, IHCL is the best pick to capture strong growth momentum in domestic tourism in the coming years. The stock trades at 33x/27x/22x its FY2024E/25E/26E EV/EBIDTA. We maintain a Buy recommendation on the stock with a revised price target of Rs. 679.
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