Multibagger Alert: Shares of Tata Group-backed Indian Hotels Company (IHCL) have emerged as multibagger in the last one year. Riding on the back of the latest strong bull run, the shares of IHCL have now given more than 100 per cent return to investors in a year. Shares of Indian Hotels have given multibagger return of over 103 per cent in a year, whereas, the stock is up about 50 per cent in 2022 (YTD) so far.
IHCL – Financials
The hospitality company delivered its best ever quarterly results for the April to June 2022 period with demand surging past pre-COVID-19 levels. IHCL reported a consolidated profit after tax (PAT) of Rs 170 crore for the quarter ended June.
The hospitality group had reported a loss of Rs 277 crore during the corresponding period of the previous financial year, IHCL said in a statement. The company’s revenue surged by 249.45 per cent to Rs 1,293 crore during the quarter under review, compared to Rs 370 crore in the year-ago period.
IHCL which took a hit during the pandemic due to a nationwide lockdown in late March 2020, has shown significant recovery in its business, and demand is seen on a sustainable path.
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In March 2020, the hotels and tourism sector faced a heavy blow due to a country-wide lockdown that halted business activities of international traveling, festivals, weddings, business travel, and much more.
Jefferies Terms IHCL a ‘Strong Investment Story’
Jefferies in its recent report on IHCL said that with its leadership position, improving asset mix, margin profile, and healthy balance sheet, is a strong investment story. In its report, it maintains its Buy rating on the multibagger stock with a target price of Rs 325 per share.
“With the strong run-up in Indian Hotels in the past 6-months/1yr, the debate is whether it fully prices in the recovery. We believe IHCL can continue to trade at a premium given it is a strong proxy play to travel recovery, as well as its brand equity, leadership position (multiple segments/price points) and the strong promoter group,” the note stated.
Further, also stated that a strong Hotel pipeline should help it capture an outsized portion of industry growth, distributed across its brands. New initiatives, a strong focus on building an “asset-right” model and sustaining the strengthened balance sheet augur well for the long term, Jefferies added.
“With the expanding scale, the company is focusing on the asset-light strategy via increasing hotel mix via management contracts (50:50 per cent mix). For IHCL, management contracts are taken based on meeting the standards and there is no quality compromise expected here; operations are targeted to be alike in Hotels under management contracts as in the case of Owned/leased Hotels. Furthermore, in the new set of signups under management contracts, a major portion is of new constructions built under IHCL advisory,” the brokerage said.
Indian Hotels Company Ltd., incorporated in the year 1902, is a Mid Cap company, operating in Tourism & Hospitality sector. It is India’s largest hotel chain and South Asia’s largest hospitality company by market capitalization. The company operates under the brand “Taj Hotels, Palaces, and Resorts”. IHCL has a diverse business portfolio in hotels, resorts, jungle safaris, palaces, spas, and in-flight catering services.
