ICICI Direct has given Buy recommendation for Indian Hotels with a target price of Rs. 150 in its research report issued on Feb 05, 2021

ICICI Direct’s research report on Indian Hotels

IHCL’s revenues for Q3FY21 improved 118.1% QoQ to Rs 559.9 crore (vs. I-direct estimate: Rs 453 crore) while it was down 59.2% YoY. Domestic leisure destination led the recovery with destinations like Goa, Rajasthan and Kerala reporting 80%, 55% and 51% occupancy, respectively, in Q3FY21. Business destinations continue to remain affected with Mumbai, Delhi, Bengaluru reporting average occupancy of 38%, 39%, 41%, respectively. Average occupancy in domestic market was at 47.4% vs. 32.3% reported in Q2FY21. Average room rates also recovered sharply by 53% QoQ to Rs 8300/room vs. Rs 5424/room in Q2. Total operating expenditure declined 39.1% YoY to Rs 577 crore with 27% reduction in fixed costs. Fixed cost per month reduced from Rs 164 crore to Rs 120 crore during 9MFY21 leading to average savings of Rs 132 crore/quarter. As a result, consolidated EBITDA loss narrowed down to Rs 16.7 crore (vs. I-direct estimate: EBITDA loss of Rs 15.8 crore) from EBITDA loss of Rs 150 crore in Q2FY21. On a standalone basis, the company reported positive EBITDA of Rs 48 crore led by sharp recovery in leisure destinations vs. EBITDA loss of Rs 87 crore in Q2FY21. Consolidated net loss came in at Rs 118.9 crore (vs. net loss of Rs 230 crore in Q2).

Outlook

We maintain BUY rating with a revised target price of Rs 150 (i.e. 28xFY22E EV/EBITDA) (earlier Rs 125).

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