Ongoing upcycle trend in hospitality to continue; Axis Capital bullish on IHCL, Lemon Tree and Juniper Hotels

Anticipating the ongoing upcycle trend in the hotel industry to sustain going ahead, domestic brokerage Axis Capital has initiated its coverage on three of the counters namely, Juniper Hotels, Indian Hotels and Lemon Tree. 

The brokerage held that the demand-supply gap in the industry will continue to be witnessed between FY24-27E. Nonetheless, it expects room supply to grow at 9 per cent CAGR whle the demand will soar at 12 per cent CAGR during FY24-27E.

Further the brokerage mentions that in comparison to the upcycle period of 2008-2015, the hospitality sector's ongoing upcycle is much more reasonable. Last time, in the backdrop of 15 per cent growth, the industry faced oversupply.

IHCL, Lemon Tree among 3 Hospitality stocks on which Axis Capital initates coverage

Triggers for growth in the hospitality sector:

Axis Capital primarily lists 4 key triggers for growth in the sector:

1. The brokerage is of the view that with growth in the corporate earnings there will be a boom in business travel.

2.  With rise in disposable income in the hands of consumers, there will be a surge in domestic travel which will bode well for players in the hospitality segment.

3. The increased expenditure in weddings and MICE (Meetings, Incentives, Conferences, and Exhibitions) will also aid growth.

4. Also, the sector's growth relies heavily on the number of foreign visitors.

The brokerage beleves that IHCL is attractively valued and other hotel stocks have to still catch-up.

Valuation

Company                 Dec 26E EV/ EBITDA
IHCL                                         40x
Juniper Hotels                       26x
Lemon Tree                           20x
 
Stock Movement YTD
IHCL                       +92%
Lemon Tree          +23%
Juniper Hotel       -10%