A Tata group stock has surged over seven times from COVID lows; should you join the rally now?

Indian Hotels Company shares soared to an all-time high amid high volumes on Thursday, rising for a third straight session.  The latest spurt took the overall gain in the stock of Indian Hotels, a Tata Group entity, to 639.8 per cent since its lowest level recorded in the depths of the pandemic.  

Indian Hotels shares rose by as much as Rs 7.6, or 1.7 per cent, to Rs 459.3 apiece on Thursday, the latest in a series of unprecedented levels scaled over the last few sessions.  

The stock has been on a phenomenal journey since hitting a COVID low of Rs 62.1, on May 18, 2020.  

So is it a good time to add the stock to your portfolio? Here’s what analysts say: 

Also, the stock's gain can be attributed to Morgan Stanley retaining its overweight rating on the stock with a target of Rs 490 per share. This marks an upside of over 8 per cent from the previous close. The brokerage sees the continued double-digit growth in the industry in fiscal 3Q average room revenue (ARRs) with standing ORs reaching one of the highest levels. The ramp up of Ginger Mumbai and trends in RevPAR will be key to track, noted the brokerage.

Earlier, Nirmal Bang in its report highlighted that the company’s management indicated that discretionary spending is likely to continue. The K-shaped recovery is likely to sustain at the upper end of the pyramid.  Demand-supply mismatch, especially in Metros, will support pricing. Moreover, the company is focussing on asset management (renovation and upgrades), which is improving Average Room Rates (ARR), highlighted the brokerage.

“The stock is flaunting sustainability over 450 level, which has been a stumbling block for the stock, Avdhut Bagkar, Derivatives & Technical Analyst of StoxBox noted. Technically, this breakout is leading towards 475 and 500, with 430 acting as support. The medium term outlook is poised to scale higher levels, as the 50-simple moving average (SMA)continues to provide crucial support at 420 levels.

The stock is trading at a high price to earnings of 59.2 compared to the industry average.

IHCL is a multibagger stock with 3-year return at 274 per cent.

The Indian Hotels Company Limited is a holding company engaged in short-term accommodation activities, and restaurants and mobile food service activities.