Indian Hotels is well-positioned for sustained growth given favorable industry trends, strong brand presence and exceptional execution capabilities which increase the opportunity size (through healthy hotel openings/signings, robust pipelines of MC, new brand acquisitions like Claridge and Trees of Life, upscaling existing properties/brands, strong balance sheet with gross/net C&CE of ~Rs 31/28 billion and superior growth in high margin new businesses). Dolat Capital likes Indian Hotels’ strong business positioning, but for valuations.
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Dolat Capital Report
The Indian Hotels Company Ltd.’s Q4 FY25 performance was in line and healthy. Consolidated revenue/Ebitda/adjusted profit after tax grew +27/30/26% YoY and 23/28/33% in FY25. Revenue/Ebitda growth (excluding Taj SATS) was impressive at ~13/20% YoY in Q4/FY25 each respectively.
Management maintains its double-digit revenue growth guidance. Q1 FY26 remains upbeat, aided by supportive base. However, with FY25 marking the third year of industry outperformance, sustaining high growth in FY26/27E could be challenging. Inherent cyclicality, economic slowdown, high base, competition and high valuations are some key risks.
We maintain our FY26/27E estimates. Reiterate ‘Sell’ rating with target price of Rs 775 @ 30 times (Pre IndAS) FY27E EV/E (versus Rs 775 @ 30x) due to rich valuations notwithstanding Indian Hotels’ superior execution, industry tailwinds of demand-supply mismatch (albeit catching up) and healthy balance sheet.
We expect revenue/Ebitda/APAT CAGR of 13/14/16 % over FY25-27E. Indian Hotels trades at ~35/31x FY26/27E EV/E and 60/50x PE.
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