Why Jefferies believes this Indian multibagger stock is a ‘strong investment story’

Earlier this month, Jefferies initiated coverage on Indian Hotels shares and in the recent report it has summarized top investor feedback and our views on a few concerns raised about the sustainability of occupancy, as well as cyclical recovery, growing asset-light mix, Ginger Hotels, and valuations.

The brokerage has maintained its Buy rating on the multibagger stock with a target price of ₹325 per share. Shares of Indian Hotels have given multibagger return of over 102% in a year, whereas, the stock is up about 50% in 2022 (YTD) so far.

“With the strong run-up in Indian Hotels in the past 6-months/1yr, the debate is whether it fully prices in the recovery. We believe IHCL can continue to trade at a premium given it is a strong proxy play to travel recovery, as well as its brand equity, leadership position (multiple segments/price points) and the strong promoter group,” the note stated.

Further, its strong Hotel pipeline should help it capture an outsized portion of industry growth, distributed across its brands. New initiatives, a strong focus on building an “asset-right” model and sustaining the strengthened balance sheet augur well for the long term, Jefferies added.

“With the expanding scale, the company is focusing on the asset-light strategy via increasing hotel mix via management contracts (50:50% mix). For IHCL, management contracts are taken based on meeting the standards and there is no quality compromise expected here; operations are targeted to be alike in Hotels under management contracts as in the case of Owned/leased Hotels. Furthermore, in the new set of signups under management contracts, a major portion is of new constructions built under IHCL advisory,” the brokerage said.

Indian Hotels is among the leading Indian hospitality companies, and has a diverse business portfolio in hotels, resorts, jungle safaris, palaces, spas, and in-flight catering services.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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