Indian Hotels Q1 Review: Analysts Split As Jefferies Maintains 'Buy', Macquarie Cautious

As the hospitality sector continues its post-pandemic resurgence, Indian Hotels Company Ltd.'s first-quarter earnings have drawn mixed reactions from Macquarie and Jefferies. The results have sparked diverse stances from cautious optimism to outright bullishness.

Macquarie maintained a 'Neutral' rating with a target price of Rs 800, on the back of a resilient quarter, but expressed concerns about rising capital expenditure. In contrast, Jefferies maintained a 'Buy' rating and a higher target price of Rs 960, confident in the company's healthy expansion pipeline, and strategic management.

Macquarie's analysis highlights the company's resilient first-quarter performance for fiscal year 2026, noting a 1% year-on-year growth in revenue and Ebitda. The analyst observed that the revenue beat was primarily driven by the TajSats catering business, which benefited from an excess tax pass-through. The Ebitda margin contracted to 25.9% from 29.8% year-on-year, attributed to pulled-forward wage hikes, digital spending, and TajSats' performance.

The hotels segment saw a 17.5% year-on-year revenue uptick, in-line with expectations. This was supported by a 12% year-on-year Revenue Per Available Room growth. International hotels also showed improvement.

A key area of concern for Macquarie is the company's capital expenditure management, with management's guidance of Rs 1.2 billion for fiscal year 2026 and Rs 0.5 billion for the next five years being viewed as disappointing, despite strong execution.

While the opening of Ginger Kolkata with Tata Sons is a positive, Macquarie's earnings estimates for fiscal years 2026-2028 are moderately tweaked, leading to lower free cash flow estimates due to higher capex.

Jefferies maintained its 'Buy' rating, emphasising the "decent performance in a turbulent quarter." The company reported a 19% year-on-year growth overall, despite external geopolitical headwinds.

Jefferies noted that the management had maintained its double-digit revenue growth guidance for fiscal year 2026 and anticipated a healthy second quarter. Domestic same-store hotels demonstrated a strong 13% RevPAR growth, while international RevPAR grew by 19% year-on-year.

Jefferies highlighted a healthy expansion pipeline, with Indian Hotels poised to add rooms at a 12% CAGR over the next five years. This includes an 18-20% growth CAGR for management contracts and mid-single-digit growth in owned or leased rooms.

The formation of a new hotel investment platform under Tata Sons, which will selectively invest in new hotel projects to be sub-leased to the company, is seen as a strategic enabler. Jefferies also pointed to a strong international portfolio performance, with RevPARs in the US, UK, and NYC showing growth.