This stock from Rakesh Jhunjhunwala’s portfolio is Motilal Oswal’s top pick for 2022 in the hospitality sector
Big Bull Rakesh Jhunjhunwala owns 14,279,200 shares in Indian Hotels Company Ltd, which corresponds to a 1.08% stake. His wife Rekha Jhunjhunwala owns 14,287,765 shares.
Rakesh Jhunjhunwala’s portfolio stock Indian Hotels Company Ltd is Motilal Oswal’s top pick of stocks in the hospitality industry for the current year 2022. IHCL unlocking value by launching new, reimagined brands and building a hotel ecosystem is another reason behind the stock’s positive view. IHCL shares traded at Rs 208.50 on Friday, down 0.45% on the National Stock Exchange (NSE). It has increased by 77.08% over the past year.
Big Bull Rakesh Jhunjhunwala owns 14,279,200 shares in Indian Hotels Company Ltd, which corresponds to a 1.08% stake. His wife Rekha Jhunjhunwala owns 14,287,765 shares, according to the latest shareholding data. The Jhunjhunwalas increased their combined stake from 2.10% in the September 2021 quarter to 2.16% in the December quarter, according to Trendlye data.
Concentrated and scalable asset-based operating model to support growth
According to analysts at Motilal Oswal, there has been a major shift in Indian Hotel’s business strategy from an asset-based model to an asset-based operating strategy. They believe that this change will promote the expansion of the hotel company’s business. The major hospitality company has reported industry-leading hotel signings and openings in 2020. Going forward, owners of unbranded and distressed hotels should approach branded players such as Indian Hotels for partnerships in the post-COVID era, to leverage IHCL’s established distribution network.
The company generated Rs 2.2 billion in revenue in FY20 from management contracts, which is expected to reach Rs 3.5 billion in the future. “Notably, the EBITDA generated from management contract revenues amounts to 70-80% without capital deployment/with minimum capital and is therefore highly accretive for RoCE. We expect contract revenue EBITDA contribution to IHIN’s consolidated EBITDA to be 20% in FY24,” the brokerage said.
Target price: Rs 258
Although the ongoing third COVID wave poses a threat to short-term revenues in the hospitality sector, Motilal Oswal expects higher vaccination and lower hospitalization rates to lead to a much stronger rebound than the second wave. Thus, the brokerage sees this weakness as a buying opportunity. It anticipates a strong recovery over the next two years. “We value the stock at 21x FY24E EV/EBITDA to arrive at our SoTP-based TP of Rs 258, implying 24% upside potential. We maintain our BUY rating on IHIN,” he added. A prolonged delay in demand recovery due to the pandemic, increased competition in acquiring rooms under management contracts and failure to grow new businesses may be the main risks of the call. purchase.
IHCL’s share price has soared more than 105% in the past five years
As markets corrected this week, Indian Hotels Company Ltd’s share price fell 0.83% in the quick five days. However, the stock rebounded more than 15% in one month. Over the past five years, the stock has climbed more than 105%. At present, the shares are down around 7% from the 52-week high of Rs 230.14, reached on October 14, 2021.
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