Indian Hotels Company Ltd. (IHCL) shares climbed over 4% on Friday on the back of a strong Q2 performance for the quarter ending September 30, 2024.
However, despite a strong financial result for the second quarter which was driven by revenue growth, better occupancy rates, and strategic moves, brokerages remain cautious on the company due to its recent rally.
Strong Q2 Results Drive Momentum
After a slower Q1, IHCL reported improvements in Q2FY25, with consolidated net profit surging 232% year-on-year to Rs 554.6 crore. Revenue from operations also saw a 27% increase to Rs 1,826 crore. Moreover, the average room rates (ARR) rose by 10.4% YoY, while occupancy increased by 150 basis points and occupancy rate stood at 78%.
Brokerage Opinions on Indian Hotels
Investec has maintained a ‘Hold’ rating but raised its target price from Rs 630 to Rs 742. It anticipates sustained margins between 32% and 32.5% for FY26/27, with projected profit growth at a CAGR of 24% from FY24 to FY27.
Emkay, also optimistic, pointed out IHCL’s operational efficiency, diversified revenue streams, and solid balance sheet to reaffirm an ‘Add’ rating with a target price of Rs 700. The brokerage pointed to October’s hotel segment growth and the upcoming wedding season as additional growth drivers.
Caution Amid Recent Gains
On a more conservative note, Nuvama has downgraded IHCL to ‘Reduce’ from ‘Hold’ due to the recent price run-up. It revised IHCL’s target price to Rs 574 based on the stock’s sum-of-the-parts (SotP) valuation. Nuvama’s analysts expect IHCL’s like-for-like (LFL) growth in FY25 to be limited to the low teens, with double-digit LFL growth expected for FY26E and FY27E.
Stock Performance
As of 9:40 AM, IHCL shares traded at Rs 712.40 on the NSE, up over 4% for the day. Year-to-date, IHCL stock has surged around 63%, substantially outperforming the Nifty index’s 10% gain. Over the last 12 months, the stock has risen 75%, while Nifty recorded a 23% increase during the same period.
