Shares of Indian Hotels were in high demand on Monday after ICICI Securities launched a hedge on the company with a buy note. The brokerage has assigned a target price of Rs 237 per share.
As of 1:30 p.m., shares of Indian Hotels were up 4.1% to Rs 193.9 each on BSE, after jumping 4.7% earlier on Monday.
ICICI Securities believes Indian hotels are well positioned to benefit from an expected recovery in the hotel business cycle from the second half of fiscal 23, which takes into account the impact of an Omicron wave.
“We are excited about the company’s efforts to leverage its existing brand equity to focus on new business segments, focus on cost optimization, thin asset management contract model for expanding the portfolio of rooms and measures to reduce its balance sheet through recent rights issue and a possible QIP (Qualified Institutional Placement) fundraising, ”the brokerage said.
ICICI Securities values Indian hotels at 21 times its March 24 EV / EBITDA ratio, which it says is in line with the long-term multiple of rated peers.
Hotels are a deep cyclical activity, which is typically hit first during an economic downturn and is the last to recover during a bull cycle, according to the brokerage. “We expect a similar story to unfold after the Omicron COVID wave, with occupancy / ARR rates expected to reach pre-pandemic levels in the second half of fiscal 23,” he said.
ICICI Securities mentioned more waves of COVID around the world and India, and increased operating costs reducing margins as key risks.
Indian Hotels rewarded investors with a return of 57.1% over the past year, compared to 24.1% for the Nifty50.
(Edited by : Sandeep Singh)