ITC Hotels Gets 'Sell' From JM Financial On Restricted Growth, Stretched Valuations — Check Target Price

ITC Hotels Ltd. received a 'sell' initiation from JM Financial as it sees stretched valuations and restricted near-term growth. "Having developed a strong portfolio of owned assets over the last two decades, the ITC Hotels has an asset-light pipeline to further expand its footprint to over 200 hotels and 20,000 keys by 2030," analysts said in a note.

The hospitality major has delivered a 22% CAGR in Ebitda over FY23-25, but near-term growth remains restricted with no new assets getting commissioned till FY28. "While robust cash generation can enable it to accelerate growth by way of inorganic acquisitions, we believe such an outcome is adequately priced in at current valuations of around 30 times FY27 estimated earnings," JM Financial said.

JM Financial expects ITC Hotels to report 11% and 13% CAGR in revenue and Ebitda over the next three years, aided by 7% growth in Average Daily Rate — a key performance indicator that represents the average revenue generated per occupied room per day — and ramp-up of the Sri Lanka asset.

However, with optimal occupancy of 73% at the portfolio level and the lack of new assets in the near term, the company’s growth profile will remain restricted, analysts said. ITC Hotels has a strong debt-free balance sheet with a net cash position of Rs 1,700 crore.

"We expect the company to generate cumulative FCF of Rs 2,500 crore over FY26-28E, which positions it well to fund the planned expansion and also undertake inorganic opportunities," the note said.

JM Financial has placed a target price of Rs 215 on the ITC Hotels' share, implying a downside potential of 12% over the previous close of Rs 244.8. The company is valued at 25 times its June 2027 Ebitda estimate, which is a 15% discount to rival Indian Hotels Co. The stock has risen 42% since listing in January after the demerger from ITC Ltd.