{"id":132132,"date":"2023-04-05T06:11:33","date_gmt":"2023-04-05T06:11:33","guid":{"rendered":"https:\/\/fin2me.com\/?p=132132"},"modified":"2023-04-05T06:11:33","modified_gmt":"2023-04-05T06:11:33","slug":"significant-room-for-upside-in-indian-hotels-stock","status":"publish","type":"post","link":"https:\/\/fin2me.com\/business\/significant-room-for-upside-in-indian-hotels-stock\/","title":{"rendered":"Significant room for upside in Indian Hotels stock"},"content":{"rendered":"

Analysts are seeing targets of around Rs 375-Rs 380 for the stock.<\/strong><\/p>\n

Devangshu Datta reports.<\/strong><\/p>\n

<\/p>\n

There was a mixed trend in the results of the hospitality sector for the October-December quarter of the 2022-23 financial year (Q3), which indicates a somewhat K-shaped recovery.<\/p>\n

While the luxury segment saw high average room rates (ARRs), occupancy rates improved sequentially but were still low compared to the pre-Covid-19 levels.<\/p>\n

The festival and holiday season meant that business travel was down.<\/p>\n

While premium hotels are expected to report decadal-high ARRs and occupancy rates, the budget segment is likely to see ARR trend at 20 per cent higher than the pre-pandemic (FY20) number but with occupancies below the pre-pandemic level.<\/p>\n

This is similar to other discretionary consumption sectors — such as automobiles — where premium sales of vehicles are much better than budget vehicles.<\/p>\n

The ARR of premium hotels increased 13 per cent year-on-year (YoY) in FY22 and is expected to rise 19-21 per cent in FY23 to a decadal high of Rs 7,500-10,000.<\/p>\n

The occupancy level, which was at 50 per cent in FY22, will also touch a decadal high of 67-72 per cent in FY23 according to Crisil.<\/p>\n

All major players reported YoY and quarter-on-quarter (QoQ) rise in earnings before interest, tax and depreciation (Ebitda) margins even if the increase was not very large in all the cases.<\/p>\n

This was driven by strong ARR and Revenue\/Available rooms (RevPAR), coupled to control of costs.<\/p>\n

Even compared to pre-Covid (October-December 2019), margins were good.<\/p>\n

Over calendar years 2018–22, room inventory increased at a 7.7 per cent compound annual growth rate (CAGR) but the pace of room growth is expected to moderate to around 1 per cent CAGR.<\/p>\n

Indian Hotels (IHCL) appears well-placed to maintain its leadership position in the segment.<\/p>\n

It has an industry-leading pipeline of about 8,800 rooms, which is over 35 per cent of its current room under operations and 40-plus new hotels are expected to open in the next two years.<\/p>\n

Another trend, which insiders are optimistic about, is a pick-up in foreign travelers which is still well below pre-Covid levels at around 70 per cent of FY20, according to Ministry of Tourism data.<\/p>\n

The G-20 Summit and the World Cup are both expected to boost the number of overseas travelers.<\/p>\n

Hence, FY24 is expected to see revival in foreign travellers with subsequent normalisation.<\/p>\n

This, of course, assumes no black swans such as another pandemic.<\/p>\n

The IHCL Q4 revenues could be down QoQ by about 12-15 per cent to Rs 1,480 crore (the Q4s of FY20, FY21 and FY22 are not comparable due to the impact of Covid-19), due to seasonality in the international markets.<\/p>\n

Domestic occupancy in Q4 is expected to rise to 75 per cent, versus 71 per cent QoQ whereas international occupancy would be 52-53 per cent (against 60 per cent).<\/p>\n

The Q4 Ebitda margins have been historically low in QoQ terms due to seasonality in international business.<\/p>\n

Hence, margins could be down by up to 150-200 basis points to 33.5 per cent in Q4, against 35.4 per cent in Q3.<\/p>\n

In the longer-term, analysts expect IHCL to see revenue CAGR of 15 per cent between FY23 to FY25 and Ebitda CAGR of 20 per cent in the same period.<\/p>\n

Analysts are seeing targets of around Rs 375-Rs 380 for the stock, which is a significant upside from the current Rs 313.<\/p>\n

Source: Read Full Article<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Analysts are seeing targets of around Rs 375-Rs 380 for the stock. Devangshu Datta reports. There was a mixed trend in the results of the […]<\/p>\n","protected":false},"author":3,"featured_media":132131,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[],"yoast_head":"\nSignificant room for upside in Indian Hotels stock - Fin2me<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/fin2me.com\/business\/significant-room-for-upside-in-indian-hotels-stock\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Significant room for upside in Indian Hotels stock - Fin2me\" \/>\n<meta property=\"og:description\" content=\"Analysts are seeing targets of around Rs 375-Rs 380 for the stock. 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