24 February 2020
TP: INR189 (+37%)
Strategy execution on track
Support from industry yet to follow
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
164 / 2.3
164 / 121
Indian Hotels (IHIN) appears to be firing well on its ‘Aspiration 2022’ target on EBITDA
margin (expansion of 800bp), revenue (improvement of 3-4%), cost (reduction by 3-5%),
project addition (15 every year) and portfolio (equal proportion of owned and managed
rooms). At its third Capital Markets meet, the company articulated execution toward this
goal – it will achieve 400bp margin expansion by FY20 and the proportion of managed
rooms has already reached 43% (as of 9MFY20). Key highlights from the meet:
Looking beyond near term; hotel industry still in upcycle
Financials Snapshot (INR b)
EPS Gr. (%)
Div Yield (%)
FCF Yield (%)
India’s hotel industry performance this fiscal has been impacted by various
factors, including Jet Airways shutdown, general elections, protests (albeit to a
smaller extent) in the NCR region, and the lack of pick-up in corporate demand
due to the economic slowdown.
However, Mr Achin Khanna from Hotelivate (hospitality consulting firm)
appeared sanguine about the underlying theme on the back of the prospects
of a favorable demand-supply scenario. While supply CAGR is estimated at 5%
over FY20-24, demand growth will likely outpace that rate going forward
(interestingly, demand growth has ranged from 9-14% over the last 14 years,
including some very challenging years).
Although bookings have been cancelled following the outbreak of coronavirus,
domestic demand has been good enough to compensate for the same. The
shift of wedding destinations from South East Asia to India in the wake of
coronavirus has also supported the bookings trend.
As part of its ‘Aspiration 2022’ goal, IHIN targets to strike a balance between
managed and owned rooms at 50:50. The company has progressed well on
this front with 43% managed rooms as of 9MFY20 versus 32% as of FY18 (incl.
IHIN has signed 27 hotels (3,542 rooms) in 9MFY20, higher than 22 (3,258
rooms) in FY19. With that, the company has outpaced industry in terms of
room addition under management contracts, in our view. Asset owners are
fast getting associated with IHIN because of (a) inclination toward being
associated with the ‘Taj’ brand and (b) transparent contract terms.
IHIN estimates income from management contracts at INR2,350m in FY20,
which has ~70% flow through to EBITDA. It expects further ramp up as hotels
launched in FY20 stabilize going forward.
Overall management contract pipeline stands at 4,727 rooms, which is ~50%
of rooms that generate management fee income (total of ~9,500 rooms and
fees are also earned from owned managed hotels, JV, subsidiary and
Staying asset light – room addition under management contracts
Shareholding pattern (%)
Dec-19 Sep-19 Dec-18
FII Includes depository receipts
Stock Performance (1-year)
Sensex - Rebased
Research Analyst : Sumant Kumar
(Sumant.Kumar@MotilalOswal.com); +91 22 61291569
(Darshit.Shah@MotilalOswal.com); +91 22 61291546
(firstname.lastname@example.org); +91 22 71934239
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.