Macquarie Sees Bright Outlook For Hotels: Double-Digit Growth And Attractive Valuations
Macquarie remains bullish on India's hotel sector, citing a favorable setup for sustainable double-digit revenue growth. The brokerage notes that a 12% valuation correction since August offers an attractive entry point, with Q3FY26 checks confirming a return to robust growth.
The brokerage noted,
12% valuation compression since August has created a good entry point
Checks indicate hotels are back to double-digit revenue growth in Q3FY26
Double-digit growth is sustainable due to high GDP growth, GST reforms, seasonal strength, low base, influx of renovated/new rooms
Pecking order is Lemon Tree, ITC Hotels and Chalet Hotels
On Monday, ICICI Securities also initiated coverage on ITC Hotel with a 'Buy' rating as it noted that the hotels business in 2018 pivoted to an ‘asset-right' strategy to achieve scalable growth while optimising capital allocation.
Going forward, the company has a visible pipeline to expand its footprint from 13,600 operational keys, as of Sep'25, to over 20,000 operational keys by 2030, the brokerage said.
ITC Hotels Ltd. reported a robust 74.3% year-on-year rise in its net profit for the second quarter of fiscal 2026. The company's bottom-line for the September quarter stood at Rs 133 crore, compared to Rs 76.2 crore in the year-ago period.
Revenue rose 7.9% to Rs 839 crore from Rs 778 crore in the same quarter last year. Earnings before interest, taxes, depreciation and amortisation grew 15.8% to Rs 246 crore from Rs 212 crore. The Ebitda margin stood at 29.3% as against 27.3% in the year-ago period.
For Lemon Tree Hotels Macquarie raised the target price to Rs 210 on Nov. 14. The brokerage had an 'Outperform' rating on the stock
Macquarie expects the real growth and margin profile to emerge as Lemon Tree's strategy to grow in mid-market is paying off. Growth from organic and current pipeline will drive free cash flow, reduce debt, resulting in a return on capital employed expansion, Macquarie said in the report.
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