With a price target of Rs 230 for ITC Hotels, analysts imply an upside potential of 20% from current market levels. For Indian Hotels, the foreign brokerage has pegged the target at Rs 830, forecasting an upside potential of over 22% from the previous close of Rs 678.
For ITC, Nomura cites strong visibility on high single-digit growth in revenue per available room (RevPAR), driven by resilient average room rate growth and improving occupancy at recently opened assets. The brokerage expects continued RevPAR gains to translate into meaningful operating margin expansion and a stronger cost structure, bringing the company closer to peers in the luxury hospitality segment.
Nomura also sees scope for improvement in return on invested capital as ITC Hotels expands room inventory through its managed-keys strategy and as its Sri Lanka assets, including ITC Ratnadipa and Sapphire Residences, gain traction. Overall, Nomura forecasts consolidated revenue and EBITDA CAGRs of 15% and 18% respectively, over FY25–FY28, along with robust annual cash generation of Rs 800-1,000 crore, which could support inorganic growth opportunities. The stock is valued at 23x FY28 EV/EBITDA, implying a 10% discount to the Indian Hotels company, which trades at 26x FY28 EV/EBITDA.
As for IHCL, Nomura says average daily rate (ADR) growth is supported by robust demand and a relatively low ADR base in dollar terms. The brokerage also highlights improving the quality of earnings and return on invested capital as IHCL expands largely through management fee arrangements and its capital-light Ginger model. Nomura believes the company is well placed to meet or exceed its 2030 targets for revenue, ROCE and portfolio size. It expects revenue and EBITDA to grow at 15% and 16% CAGRs, respectively, over FY25–FY28 and is valued at 26x FY28 EV/EBITDA. While valuation multiples have moderated from a peak of 42x FY26 EBITDA to about 27x FY27 EBITDA over the past year, Nomura expects multiples to stabilise as earnings transition from a high-growth to a more steady growth phase.
Nomura expects ARR growth to remain resilient over FY25–FY28, driven by a favourable demand–supply equation. Room supply in key business cities where IHCL operates is likely to expand at only a 5–7% CAGR between FY25 and FY30, even if all announced projects are completed. On the demand side, strength is expected from domestic tourism, which is at an all-time high, a gradual recovery in foreign tourist arrivals that remain below pre-pandemic levels, and sustained momentum in MICE events or Meetings, Incentives, Conferences and Exhibitions.
Nomura points to an accelerated pace of growth, with 50–70 hotel signings and 25–35 openings annually, largely through asset-light models. Around 80% of new keys are expected to be added under management contracts, with nearly 95% of the Ginger brand’s mid-scale expansion coming via management agreements or revenue-sharing leases.ITC Hotels’ stock price rose 2% to its day’s high of Rs 196 in today’s session. Indian Hotels, on the other hand, rose by over a per cent to Rs 686 per share on the BSE.
(Disclaimer: The recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times.)