Indian Hotels: Brokerages see over 30% upside in this Rakesh Jhunjhunwala's stock; shares up 60% in one year despite volatility

Brokerage houses are bullish on Indian Hotels shares after the company highlighted its efforts to grow its existing and new businesses and deploy its capital efficiently to generate better returns in the FY22 annual report.  

Indian Hotels is one of the 33 stocks held by celebrity investor Rakesh Jhunjhunwala in his portfolio. Rakesh Jhunjhunwala and wife Rekha Jhunjhunwala jointly hold a 2.1% stake in this hotel and resorts company as on March 2022. Together, they have 30,016,965 shares of Indian Hotels, as per BSE corporate filing of the company. 

Meanwhile, after Indian hotels reiterated Indian Hotels' “AHVAAN 2025” strategy in its annual report, brokerage firms are bullish on the counter. AHVAAN strategy is an extension of company’s earlier “Aspiration 2022” strategy which focused on asset light expansion and improvement in margins.Under AHVAAN 2025 strategy, it expects to reach a portfolio of 300 hotels, comprising Taj (100), Vivanta and SeleQtions (75), and Ginger (125).  

Brokerage house ICICI Securities maintained a buy call on the hotel stock with a target price of Rs 284 per share, which translates into an upside of 32% on Wednesday's closing price of Rs 215.  

The brokerage was of the view that the growth and margin targets set by the company's management are realistic. "We estimate FY23E consolidated revenue to grow 54% YoY to Rs46.2bn (104% of FY20 levels) and FY24E revenue to grow 18% YoY to Rs54.5bn at an EBITDA margin of 32%," it said. 

As per ICICI Securities, key risks remain are fresh Covid cases, which can impact demand and rise in costs denting margins. 

Stating the company's asset-light model and new and reimagined revenue-generating avenues, with higher EBITDA margins, bodes well for an expansion in RoCE, Motilal Oswal retained a buy rating on Indian Hotels. The brokerage pegged the target price of the hotel stock at 274 per share in one year.  

"Like FY22, we expect a strong recovery in FY23 and FY24, led by an improvement in ARR once economic activity normalizes, improved occupancies, cost rationalization efforts, an increase in F&B income as banqueting/conferences normalizes and higher income from management contracts," said the brokerage.  

On Wednesday, shares of Indian Hotels gained three percent in Wednesday's intraday trade to Rs 221.90 per share on the BSE. Despite falling market and Covid 19 challenges, the price history of Indian Hotels shows that the stock gained over 60% in the past one year as on June 23.