Rakesh Jhunjhunwala’s multibagger stock gains 175% in 2 years. Should I buy?

Rakesh Jhunjhunwala has one of the most successful stories of making valuable gains in stocks. His long-term strategy, making the most of the bear market and his diversified stock portfolio, made him a billionaire. On Thursday, Jhunjhunwala’s wealth in shares of Indian hotels backed by the Tata group jumped close 25 crores in a single day. The stock in the hotels and resorts segment has additional upside potential due to continued strong growth plans ahead.

On the BSE, Indian Hotels finished at 223.50 each per 8.30 or 3.36%. At the closing price, its market capitalization amounted to 31,745.93 crores.

On Wednesday, Indian Hotels shares stood at 215.20 each.

Indian Hotels is a BSE Group “A” stock and trades below the S&P BSE 200 Index.

As of March 31, 2022, Rakesh Jhunjhunwala’s stake in Indian Hotels is 1,57,29,200 shares or 1.11%. He also owns 1,42,87,765 shares or 1.01% of the company through his wife Rekha Jhunjhunwala as per the shareholding scheme.

His portfolio and that of his wife are managed by Rakesh. Together, the couple owns 3,0016,965 shares or 2.12% of the company.

Compared to the previous day’s closing price, Indian Hotels shares rose by 8:30 a.m. With this, Jhunjhunwala made gains of around 24,914 crore (3,00,16,965 shares X 8:30 a.m.) in the company during a one-day trading session.

According to Trendlyne data, Jhunjhunwala’s overall stake in Indian hotel values 670.9 crore to date. Not only that, his wealth in the business is the seventh most valued in his portfolio after Fortis Healthcare, Crisil, Tata Motors, Metro Brands, Star Health and gemstone and jewelry giant Titan which till date represents the majority of his wealth. .

In one year, India’s hotel stock has soared 61.62% so far. On June 23 of last year, the stock was only about 138.28 each on BSE.

The big bull started investing in Indian hotel stocks in June 2020, according to the data. This was the time when the coronavirus pandemic was causing a nationwide lockdown and severely hampering hospitality operations. However, it also shows that Jhunjhunwala has been bullish on the company’s stock.

Over the past two years, Indian Hotels has become a multi-bagger, with its gain increasing by 175.08%. The stock was around the Level of 81.25 on June 23, 2020, according to BSE data.

Should you buy Indian Hotels shares?

In its FY22 annual report, Indian Hotels said it plans to execute its “AHVAAN 2025” strategy which basically focuses on four key pillars including 1) reaching a total of over 300 hotels in the portfolio, 2) saving a consolidated EBITDA margin of 33% by FY26E with 35% share of EBITDA coming from management contracts and new businesses, 3) achieve a 50:50 ratio between room keys owned/leased and management and 4) maintain a net cash balance while pursuing its growth plans.

Adhidev Chattopadhyay, Research Analyst at ICICI Securities, said, “The AHVAAN strategy is an extension of the company’s earlier ‘Aspiration 2022’ strategy, which focused on asset-light expansion and margin improvement.”

According to the analyst, in April and May 2022, the company’s revenues are 10% above pre-Covid levels and with a sustained recovery in business travel as well as leisure.

“We expect FY23E revenue and FY24E revenue at 104% and 122% of pre-Covid (FY20) levels, respectively. . the company’s guidance of 33% by FY26E taking into account the impact of inflation,” Chattopadhyay said.

Further, the analyst said, “We reiterate our Buy rating with a revised target price based on SoTP of Rs284/share (previously Rs292), valuing the stock at 22x Jun’24E EV/EBITDA. Risks to our rating are further waves of Covid impacting demand and rising costs weighing on margins.”

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