“The runrate of occupancies/ ARRs are comfortably strong, the management is confident on margins, biz mix under Ahvaan-2025 strategy and remaind focused on BS/ FCF, building cash for adversities; resolution for International & Searock Investment in 2-3 years," the note stated.
Believing it to be ‘Stronger for Longer’, Jefferies has maintained its Buy rating on Indian Hotels shares and has increased its target price to ₹380 (from ₹325). The Tata Group stock has rallied more than 72% in 2022 (YTD) so far.
Per management, occupancies in 2QFY23 are trending closer to 1QFY23, despite 2Q being a seasonally weaker quarter (due to monsoon / school reopening etc). Room rates are trending much higher (vs pre Covid) for 2Q driven by better than expected occupancy and leisure demand sustaining at higher levels, it highlighted.
Resumption of foreign travel, sustained revival in corporate travel and large MICE events, wedding season could continue to support growth in seasonally stronger 2H, as per Jefferies.
"Questions remain on International operations and Searock investment in India. Turnaround for both could be within 2-3 years. International expansion, if any would be on an asset-light basis. The company continues to target reduction in cash losses at the New York property (The Pierre), with a material reduction in costs. Operations at other international properties remain cash positive," the note added.
IHCL has emerged stronger post the Covid-led slump in business and has led the Industry recovery in terms of RevPAR. With Industry-leading Hotel signups/pipeline, IHCL will benefit from expansion in market share and rate premium and growth in management fees income as it grows its portfolio of owned and management contracts. Strong recovery in occupancy rate and room rentals to drive double-digit Ebitda/PAT CAGR for FY20-FY25e, it said.
“Leisure demand was early to pick up post-Covid and the trends have sustained, despite the pent-up component being largely behind. Further, seeing the domestic tourism trends, opening up of International VISAs may not necessarily bring down the leisure demand in India."
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