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Motilal Oswal Services
Indian Hotels (Buy)
CMP: ₹149.9
Target: ₹189
The Indian Hotels Company Ltd is a holding company. The company is engaged in short-term accommodation activities, and restaurants and mobile food service activities. The company is primarily engaged in the business of owning, operating and managing hotels, palaces and resorts.
Indian Hotels appears to be firing well on its 'Aspiration 2022' target on EBITDA margin (expansion of 800 bps) and portfolio (equal proportion of owned and managed rooms). At its Capital Markets meet, Indian Hotels articulated execution toward this goal - it will achieve 400 bps margin expansion by FY20.
Indian Hotels is well on track to achieve its goal and has made good progress on other strategic initiatives such as rebranding of Ginger, monetising of existing land bank, selling non-core assets, joint venture with GIC to add rooms and creating alternative revenue streams.
India's hotel industry performance this fiscal has been impacted by various factors, including Jet Airways shutdown, general elections, and the lack of pick-up in corporate demand due to the economic slowdown.
However, the underlying thesis of favourable demand-supply led growth in hotels industry remains intact. This will also work in favour of Indian Hotels.
On an SOTP basis, we arrive at a target price of ₹189. Maintain ‘Buy’.
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