ITC Hotels Rated 'Add' By Axis Capital — Check Target Price

ITC Hotels Ltd. received an 'add' recommendation from Axis Capital with a bullish target price. Analysts estimate the company's revenue and Ebitda to grow at a CAGR of 13% and 15%, respectively, over the next three years.

This growth will be led by a 10% RevPAR (Revenue Per Available Room) growth and a 22% growth in managed fees. ITC Hotels will be able to pursue aggressive expansion in the near term given a strong free cash flow and healthy balance sheet, they said.

"After a decade of weak growth, the firm is back on the growth path, mostly through the managed route (like with peers), focusing on the mid-premium segment. Its luxury-focused owned portfolio stands to benefit from the current upcycle," an Axis Capital note said.

Analysts also pointed out that ITC Hotels, India's second-largest listed hotel chain, has adopted an asset-light strategy where it owns premium and marquee assets but manages the mid-premium segment. Most of its room additions in the next five years will be in the mid-premium segment, implying its luxury share will fall to 28% from 37% currently.

The company's owned portfolio remains luxury-focused and will benefit from higher demand in the segment due to higher corporate travel and discretionary spending and weaker supply addition. High Average Room Rate (ARR) growth will aid RevPAR to grow in double digits.

Axis Capital has initiated an 'Add' rating on the ITC Hotels stock. The 12-month price target is Rs 271, implying an upside potential of 9% over Tuesday's close of Rs 248. In terms of valuation, the stock is priced at 30 times its September 2027 estimated enterprise value-to-EBITDA.

Seven out of the eight analysts tracking ITC Hotels have a 'buy' rating on the stock, and one suggests a 'sell', according to Bloomberg data. The average 12-month analyst price target of Rs 263 implies a potential upside of 6%.

The stock has risen 45% since listing in January.