Indian Hotels - Q2FY21 Result Update - ICICI Direct

IHCL's Q2FY21 performance broadly remained in line with our estimates. Hotel reopening in key metro cities like Delhi, Maharashtra along with new revenue initiatives led to QoQ improvement in topline. This, along with significant fixed cost reduction helped the company to narrow down losses for the quarter. Revenues grew 78.7% QoQ to Rs. 256.7 crore (vs. I-direct estimate: Rs. 241.8 crore) while it was down 74.5% YoY. Average occupancy levels of domestic business improved to 32.3% vs. 20.5% in Q1, 62% last year while ARR also improved 12% QoQ to Rs. 5424 for the quarter. Major pick-up is being seen in leisure destinations. New business initiatives like launch of Qmin (online food delivery), staycations in Q1FY21 yielded additional revenue of Rs. 135 crore in H1FY21. Ginger hotels performance also improved significantly with occupancy reaching 51% in September 2020 from average of 31% in Q1. IHCL continued its cost optimisation measures and reduced total operating expenditure by 51.9% YoY to Rs. 407 crore. Now with unlocking of economy, the hotel business is gradually picking up with revival of demand being first getting witnessed in the domestic leisure segment. This, along with cost optimisation initiatives have led to September 2020 witnessing positive EBITDA. With more focus on asset light business, going forward, we expect the liquidity profile of the company to improve, going forward, once business gets back to normalcy.

Valuation & Outlook

We believe the current pandemic environment will make strong players like IHCL even stronger once normalcy resumes. With the resumption of the economy, we expect tourism to witness a sharp recovery in FY22E. Given the company's strong parentage and brand visibility along with meaningful cost optimisation measures, concerns with respect to liquidity are now being negated. Hence, we now further upgrade the stock from HOLD to BUY with a revised target price of Rs. 125/share (i.e. 25xFY22E EV/EBITDA).

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_IndianHotels_Q2FY21.pdf

Shares of INDIAN HOTELS CO.LTD. was last trading in BSE at Rs.98.9 as compared to the previous close of Rs. 96.5. The total number of shares traded during the day was 91931 in over 1067 trades.

The stock hit an intraday high of Rs. 99.35 and intraday low of 95.2. The net turnover during the day was Rs. 8961705.

Source : Equity Bulls

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