Jefferies Backs ITC Hotels, Predicts a 63% Rally to ₹280 in Bull Case Scenario
Jefferies Backs ITC Hotels : Shares of ITC Hotels saw an upward trend in the afternoon session on February 12 after global brokerage firm Jefferies initiated coverage on the stock with a bullish outlook. The brokerage firm has given a ‘buy’ rating to ITC Hotels and set a base target price of ₹240 per share, implying a 40% upside from current levels. However, in a more optimistic scenario, Jefferies believes the stock could surge up to ₹280 per share, reflecting a potential 63% gain.
Strong Growth Potential for ITC Hotels
Jefferies’ analysis suggests that ITC Hotels is poised for significant growth in the coming years. The firm expects revenue to grow at a compounded annual growth rate (CAGR) of 15% between FY24 and FY27. The revenue from like-for-like hotels is projected to grow at 11% CAGR, driven by a well-planned expansion strategy that combines organic growth with strategic acquisitions.
Currently, ITC Hotels owns a portfolio of 25 hotels, including 15 ITC-branded hotels, 9 WelcomHotels, and 1 Fortune hotel. The company’s asset ownership is balanced, with 45% of properties being owned and 55% managed. However, recent capital expenditures have impacted the return on investments.
To drive future growth, ITC Hotels is focusing on an asset-light expansion strategy by increasing its managed properties under management contracts. The company plans to expand its total room count from 13,000 to 18,000 by 2029-30. Additionally, ITC Hotels aims to increase the share of premium hotel keys in its managed portfolio from 30% to 42% over the next five years, which is expected to improve the brand’s positioning and profitability.
Favorable Market Trends to Support ITC Hotels’ Growth
The Indian hospitality industry is witnessing a sustained demand for travel and tourism, particularly in the luxury segment. With a limited addition of new supply in the industry, ITC Hotels is in a strong position to capitalize on higher occupancies and increased room rates.
Jefferies’ projections indicate a 9% CAGR in Revenue per Available Room (RevPAR) for ITC Hotels’ India business between FY24 and FY27. Furthermore, the company’s asset-light model is expected to accelerate growth, leading to an estimated 16% CAGR in EBITDA over the same period.
Financial Overview and Valuation Metrics
Here’s a look at ITC Hotels’ key financial metrics:
| Metric | Value |
|---|---|
| Market Cap | ₹35,859 Cr. |
| Current Price | ₹172 |
| High / Low | ₹189 / ₹155 |
| Industry P/E | 36.5 |
| Dividend Yield | 0.00% |
| Debt to Equity | – |
| ROCE | – |
| ROE | – |
| Book Value | – |
| PEG Ratio | – |
| Intrinsic Value | – |
| Graham Number | – |
| Piotroski Score | 0.00 |
| No. of Eq. Shares | 208 |
With a bullish outlook on the hospitality sector and a strategic growth plan in place, ITC Hotels is well-positioned to benefit from industry tailwinds. The company’s shift towards a high-margin, asset-light model, coupled with increased demand in the premium segment, could significantly boost its profitability in the coming years.
Final Thoughts
Jefferies’ optimistic rating on ITC Hotels highlights the potential for strong returns in the long term. The company’s aggressive expansion strategy, rising occupancies, and focus on premium hospitality make it an attractive investment. While the stock currently trades at ₹172, the brokerage firm’s target of ₹240 (base case) and ₹280 (bull case) suggests significant upside potential for investors.
As the hospitality sector continues to recover and expand, ITC Hotels remains a key player to watch. Investors looking for growth opportunities in the sector may find ITC Hotels an attractive bet backed by strong fundamentals and favorable industry trends.
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Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.