Broker's call: Indian Hotels (Accumulate)

Target: ₹88

CMP: ₹80.95

Indian Hotels Company Ltd.’s (IHCL) Q1-FY21 result was below our and consensus estimates on all parameters. Impact of Covid-19 on hospitality is strikingly visible as net sales sharply deteriorated for organised players, including IHCL.

Net sales declined by 85.9 per cent y-o-y to ₹143.60 crore, while EBITDA came in at negative ₹266 crore, down by 253.4 per cent y-o-y . The company reported net loss of ₹312.60 crore compared to net profit of ₹17.60 crore in Q1-FY20.

The company’s majority of inventory was closed for approximately 45 days in Q1-FY21, while operational inventory was used for quarantine facilities and medical staff. Extension of lockdown and interstate travel ban dented leisure segment during the quarter.

Though exit occupancy for June 2020 indicates early signs of revival, we believe it would take a while for a meaningful improvement in occupancy/ADR.

We have cut our net sales/EBITDA estimates by 3.3 per cent and 26.2 per cent for FY21 and 2.7 per cent and 3.6 per cent respectively for FY22.

We downgrade the stock to Accumulate from buy.