Indian Hotels’ robust Q2 sparks optimism among brokerages; stock hits all-time high

Shares of Indian Hotels, a part of Tata Group, surged nearly 6% to hit record high on Friday after South Asia's largest hospitality firm reported strong earnings in the September quarter of the current fiscal. Brokerages also turned bullish on the stock as the earnings were slightly above Street estimate, while steady double-digit revenue guidance also boosted sentiments.

Snapping previous session losses, Indian Hotels shares gained as much as 5.6% to hit a new life-time high of ₹722 in the first hour of trade so far on the BSE. The hospitality heavyweight opened 3.85% higher at ₹709.95 after ending 0.21% lower at ₹683.60 in the previous session. At the time of reporting, the market capitalisation of the Tata Group stock stood at ₹1.01 lakh crore.

The share price of Indian Hotels has delivered consistent returns in the last one year, rising 79% from its 52-week low of ₹403.10 touched on November 10, 2023. In the last one year, the stock has given 79% returns to its shareholders, while it surged 66% in the calendar year 2024. In the last six months, the counter added 28%, while it rose nearly 6% in a month.

Post Q2 FY25, Indian Hotels (IHCL) reported a 232% growth in its consolidated net profit (attributed to shareholders of the company) at ₹554.6 crore, from ₹167 crore in the year ago period. The revenue from operations for IHCL jumped 27.4% to ₹1,826 crore in Q2 FY25 from ₹1,433 crore a year ago.

The management of IHCL remains confident of achieving over 10% revenue growth in FY25 (ex of Tajsats consolidation), led by higher wedding dates in H2 (up 30% YoY) and increase in FTA. It targets to open 25 and 30 hotels in FY25 and FY26, respectively.

Post Q2, Motilal Oswal retained ‘Buy’ call on the stock with a target price of ₹770, saying that overall outlook for second half of the fiscal continues to remain optimistic. “The company has witnessed revenue growth of 16.5% YoY in Oct’24 with majority of the growth being contributed by an increase in ARR. Management expects this strong momentum to continue in Nov’24 as well.”

The company spent ₹350 crore in capex in H1 (including ₹200 crore on renovations) and plans to spend ₹700-800 crore capex in FY25. There are three greenfield projects under pipeline – Aguada Plateau, Goa, Shiroda, Maharashtra; and Sea Rock that are set for a time-bound development, the report noted.

Emkay has maintained ‘ADD’ to the stock with a price target of ₹700, saying that the company delivered improved performance in Q2 after a soft Q1. “With H1FY25 already seeing 11% YoY revenue growth, the management remains confident of delivering double-digit revenue growth for FY25. October saw strong growth of 16.5% YoY (Hotel segment) and multiple wedding dates over the next 2 months should aid growth.”

“Over the medium term, favorable demand-supply dynamics act as tailwinds for the business. IHCL’s diversified revenue stream, operational efficiency, and strong balance sheet keep the company in good stead. Our FY25-27E EBITDA gets a boost of 7-13% from the consolidation of Taj SATS and factoring in the Q2 performance,” it says in its report.

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