Buy Indian Hotels, target price Rs 100: Anand Rathi

After Covid-19 subsides, the brokerage believes the company would outclass others, driven by its strong brand equity and all-India spread.

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Anand Rathi has given a buy rating to Indian Hotels with a target price of Rs 100.

With the "no-travel" policy and companies adopting "work from home", the brokerage expects the impact of the virus to begin waning by June-July, and business to pick up in H2 FY21. It also assumes that as the last few months of 2020 roll in, inbound travel is likely to be a fraction of what India gets in typical years. Considering the situation and its impact on hospitality, the FY21e/FY22e EBITDA for Indian Hotels has been cut by 71.7 per cent/39.7 per cent.
The share price moved up by 2.38 per cent from its previous close of Rs 69.35. The stock last traded price is Rs 71. Incorporated in 1902, Indian Hotels has a market cap of Rs 8253.45 crore.


Investment Rationale

The company is in a comfortable position regarding debt, given its limited refinancing needs and strong promoter backing. Key assumptions taken for FY21 are: standalone properties: 40 per cent occupancy with 12 per cent y/y cut in ARR; US and UK properties: 30 per cent occupancy with 12 per cent y/y cut in ARR). The brokerage retains buy rating on the stock, with a lower target price of Rs 100, from Rs 180 (sum-of-parts or SoTP valuation)

After Covid-19 subsides, the brokerage believes the company would outclass others, driven by its strong brand equity and all-India spread, leadership in the deluxe category and better performances of its subsidiaries..
Risk: Any slow-down in the economy would lead to curtailed demand.

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Financials

For the quarter ended December 31, 2019, the company reported consolidated sales of Rs 1372.72 crore, up 36.26 per cent from last quarter sales of Rs 1007.44 crore and up 3.72 per cent from last year's same quarter sales of Rs 1323.45 crore. The company reported net profit after tax of Rs 193.73 crore in the latest quarter.
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