Indian Hotels Gets JPMorgan's 'Overweight' Initiation On Strong Fundamentals

JPMorgan has initiated coverage on Indian Hotels Co. with an 'overweight' rating and a target price of Rs 890, citing the company's strong underlying fundamentals and early achievement of fiscal 2030 targets as key drivers.

"We see FY30 targets being delivered ahead of schedule. Return on Capital Employed should reach 19% by FY28 on the back of significant additions to managed keys and capital-light business share growing to 70%," it stated.

While the brokerage noted that IHCL has underperformed since delivering 4 times returns in mid-2019, it believes the weakness is temporary. JPMorgan expects IHCL to rebound on account of "better than expected Revenue Per Available Room or RevPAR growth in FY26E; reversal of recent consensus Earnings Per Share cuts post military escalation; and 1QFY26 performance off a low base and initial signs of high offtake."

The brokerage also highlighted that the firm is leading on performance, pipeline and premium and is way ahead of its peers on some of these fronts. "IHCL is a brand leader and a strong multi-segment player, commanding 21%/13% premium to FY25 luxury segment RevPAR/occupancy. We expect a RevPAR Compound Annual Growth Rate of 11% over FY25-28E with occupancy reaching 81%. The company has a pipeline of 7,200 rooms (1,000 owned; 6,200 managed) over FY25-27E, far exceeding its peers," it noted.

Moreover, according to JPMorgan, the company is already more than halfway towards achieving revenue and RoCE goals, while also focusing on portfolio expansion.

"IHCL is expanding its portfolio across medium/high pricing and services brands like Tree of Life, and The Claridges through management contracts. International business is on the recovery track, while new and re-positioned businesses are delivering revenue growth and margins better than traditional segments, improving the risk profile," the brokerage added.