Anand Rathi sees 28% upside in this recently listed hospitality stock; take a look

Brokerage firm Anand Rathi has initiated coverage on newly listed Apeejay Surrendra Park Hotels and sees a 28 per cent upside in the stock from Friday's closing price of Rs 222.5 apiece. The brokerage has given a 'buy' call on the stock for a target of Rs 285 apiece. 

Anand Rathi is bullish on the hotel company's diversified categories across luxury and upscale through The Park brand and upper mid-market through Zone by The Park. 

"The company operates 30 hotels in the luxury categories: boutique upscale (The Park, The Park Collection) and upper-midscale (Zone by the Park, Zone Connect by the Park) across India at metropolises such as Kolkata, New Delhi, Chennai, Hyderabad, Bengaluru, Mumbai, and other tier 2/3 cities," as per the report.

Further, the company has an advantage as its hotels are located at prime destinations, and the bulk of its revenue arises from domestic business and leisure travellers. 

"Most of the properties have the highest occupancy rates in the industry (over 90 per cent; industry average 66 per cent) with room rates more attractive than peers (a 12 per cent discount to industry ARR) largely due to corporate clientele," the report read. 

Given the outlook for the hospitality sector, Anand Rathi expects the healthy occupancy and average room rate (ARR) of 13.6 per cent and the compound annual growth rate (CAGR) over FY24-FY26 to continue, leading to significantly better margins from 31.4 per cent in FY23 to 38.2 per cent in FY26 and free cashflows.

Additionally, high contingent liabilities and the economic slowdown could pose some risks for Apeejay Surrendra Park Hotels. 

Recently, Apeejay Surrendra Park Hotels made a decent debut on Dalal Street as the stock got listed at a premium of nearly 21 per cent on the BSE at Rs 187 as against the IPO price of Rs 155. On the NSE, the stock was listed at Rs 186, up 20 per cent.

In around 15 days of listing, shares of Apeejay Surrendra Park Hotels have gained over 17 per cent, while calculated from its listing price and nearly 42 per cent calculated from its issue price. 

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