Shares of Indian Hotels Company Ltd (IHCL), a part of Tata Group, continued their gaining streak for the second straight session on Thursday, rallying nearly 5% during this period, in an otherwise weak broader market. The Tata Group stock touched its new all-time high today amid fresh buying after brokerages upgraded the target price for IHCL, citing the company's growth plans.
Extending its uptrend for the second trading day, Indian Hotels shares gained as much as 2.7% to touch a fresh record high of ₹774 on the BSE, while the market capitalisation climbed to ₹1.1 lakh crore. Early today, the stock opened higher at ₹760 after ending 2.18% higher at ₹753.40 on Tuesday.
The share price of IHCL has risen 87% from its 52-week low of ₹413.50 touched on November 22, 2023. The hotel stock has given consistent returns to its shareholders throughout the year, delivering 84% in a year; 36% in six months; and 77% in the calendar year 2024. In the past one month, the largecap stock has gained 14% despite correction in the broader market.
Foreign brokerage house Jefferies has revised the stock’s target price to ₹900 with a ‘Buy’ call, indicating an upside potential of 20% from the last closing price on the BSE. Domestic brokerage Emkay has maintained ‘ADD’ with 12-month target price of ₹760.
Brokerages turned bullish on the stock after the management unveiled its ‘Accelerate 2030’ strategy, aiming to expand its brandscape, deliver industry-leading margins, double its consolidated revenue with more than 20% return on capital employed (ROCE), and grow its portfolio to over 700 hotels. This involves taking the new and re-imagined business to over 25% revenue share and scaling up of management fees above ₹1,000 crore by FY30.
“IHCL did not provide any explicit margin guidance; we believe margin trajectory will be contingent on the industry upcycle. We maintain our estimates, but increase our target multiple to 27x (from 26x) amid continued business strength. In our view, IHCL’s diversified revenue stream, operational efficiency, and strong balance sheet warrant a premium multiple,” Emkay says in a report.
IHCL aims to expand its current portfolio of 350 hotels (both operational and pipeline) to 700+ hotels by FY30. “The number of operational hotels should grow from 232 to 500+ during the same period. This includes opening and signings of 15 hotels each year for the traditional brand and accelerated 50 new hotel signings and 30 new openings each year for the new brands,” the report read.
On the financial front, IHCL aims to reach consolidated revenue of ₹15,000 crore by FY30 (implying a CAGR of 14% over the next 6 years), with management fees expected to surpass ₹1,000 crore during the same period. “Key revenue growth drivers include: steady RevPAR growth (8% CAGR till FY30) along with asset management initiatives in the traditional business; continued momentum in new business (expected revenue CAGR of over 30%); healthy gain in management fees (15-18% CAGR) driven by net unit growth; reimagined TajSATS and Chambers growth momentum,” the report highlighted.
For the second quarter ended September 30, 2024, Indian Hotels reported a 232% growth in its consolidated net profit (attributed to shareholders of the company) at ₹554.6 crore as compared to ₹167 crore in the year ago period. The revenue from operations jumped 27.4% to ₹1,826 crore from ₹1,433 crore in the corresponding period last year. The Earnings before Interest, Taxes, Depreciation and Amortisation (EBITDA) rose 41.3% to ₹501.27 crore against ₹354.78 crore in Q2 FY24.
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