Motilal Oswal, a leading financial services provider, has backed this Tata Group-backed company, citing that it is optimistic about the company’s business prospects and future and expects an upside potential of 15 percent. In this article, we will understand the rationale behind it
Price Movement
With a market capitalization of Rs 1,17,775 crore, the shares of Indian Hotels Company Ltd. are currently trading at Rs 826.55 per share, trading at a discount of 7.5 percent, from its 52-week high of Rs 894.90 per share. Motilal Oswal has signaled an upside potential of 15 percent with a target price of Rs 950 per share for the shares of Indian Hotel Company Ltd.
Brokerage Rationale
The brokerage mentioned that Indian Hotels Company made an exceptional strategy by embracing an asset-light model, reimagining Ginger Hotels, and expanding into new segments. Under the management, the company has rapidly embraced an asset-light growth strategy, with management contract room keys expanding at an 18% CAGR during FY19- 24, far exceeding the 2% CAGR of owned hotels.
Also, it has been maintaining 70-75 percent EBITDA margins in management contracts, which led to an increase in its share across key brands, enhancing scalability and profitability.
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IHCL’s initiative to transform Roots Corp. (RCL) into a lean luxe player has delivered impressive results, achieving a 13 percent revenue CAGR and 55 percent EBITDA CAGR over FY19- 24. The company is aggressively expanding under the Ginger brand, with 874 new rooms planned by FY27 and a growing focus on managed hotels. Additionally, the integration of Qmin is enhancing scalability and driving profitability, positioning RCL for sustained long-term growth.
As of January 2025, the company has an operational portfolio of 237, and 125 are in the pipeline. This takes IHCL’s portfolio to 362. Motilal Oswal expects IHCL to deliver a CAGR growth of 18/24/26 percent in revenue/EBITDA/adjusted PAT over FY24-27.
Financial Highlights
The company reported a revenue of Rs 2,533 crore in Q3 FY25, up percent, from its Q3 FY24 revenue of Rs 1,964 crore. It reported a net profit of Rs 633 crore in Q3 FY25, up by percent, from its Q3 FY24 net profit of Rs 477 crore.
It has a cash balance of Rs 1,730 crore with minimal exposure to debt. It has an ROE and ROCE of 14.3 percent and 15.1 percent. It has been trading at a P/E ratio of 75.38x, which is significantly higher than the industry P/E ratio of 34.58x.
Written by Satyajeet Mukherjee
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