Kotak raises target price for IHCL, Chalet, Lemon Tree, Samhi Hotels; remains optimistic about hotel stocks

Kotak raises target price for IHCL, Chalet, Lemon Tree, Samhi Hotels; remains optimistic about hotel stocks
Kotak raises target price for IHCL, Chalet, Lemon Tree, Samhi Hotels; remains optimistic about hotel stocks/Pixabay
Kotak raises target price for IHCL, Chalet, Lemon Tree, Samhi Hotels; remains optimistic about hotel stocks
Kotak raises target price for IHCL, Chalet, Lemon Tree, Samhi Hotels; remains optimistic about hotel stocks/Pixabay

Kotak raises target price for IHCL, Chalet, Lemon Tree, Samhi Hotels; remains optimistic about hotel stocks

Kotak raises target price for IHCL, Chalet, Lemon Tree, Samhi Hotels; remains optimistic about hotel stocks

Kotak raises target price for IHCL, Chalet, Lemon Tree, Samhi Hotels; remains optimistic about hotel stocks

Positive Outlook for Hospitality Industry

Favorable demand-supply dynamics and improving average room rates (ARR) are expected to benefit India’s hospitality industry. Kotak Institutional Equities (Kotak Securities) remains bullish on the sector, revising upward the sector’s FY25E EBITDA and raising fair values of key stocks including Indian Hotels Company, Chalet Hotels, Lemon Tree, and Samhi Hotels.

Room Rate Growth and Earnings Revision

Kotak Securities has raised its FY25 EBITDA estimates by 2-6% across its coverage universe, factoring in double-digit room rate growth in FY25E. Average hotel room rates in India surged by 14% YoY to ₹7,560 per day in 11MFY24, with a peak exit room rate of ₹8,900 per day in February 2024. This uptick in ARR has prompted a 2-5% upward revision in ARRs across coverage companies, translating to up to a 6% revision in FY25E EBITDA.

Stock-Specific Analysis

Indian Hotels Company and Chalet Hotels witnessed the highest earnings revision, with fair values raised to ₹620 and ₹900, respectively, attributed to significant ARR improvements in premium hotels. Lemon Tree saw a lower revision due to lower tariffs for Aurika Mumbai, while Samhi Hotels’ fair value was raised to ₹270 with a 6% revision in FY25E EBITDA.

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