ITCHOTELS

Sustains Momentum, But Stock Looks Fairly Priced

reported a robust Q3FY26 operating performance, supported by strong demand in its hotel business and the commencement of luxury apartment sales in Colombo. While earnings visibility remains healthy, the stock’s rich valuations cap near-term upside, suggesting investors should moderate expectations. Revenue and Profit Trends - Consolidated revenue grew 21% YoY. - Hotel segment revenue rose 14% YoY to ₹1,132 crore. - Room revenue up 12% YoY, driven by corporate, wedding, and MICE demand. - Luxury apartment sales in Colombo contributed ₹82 crore. - Net profit rose 9% YoY, dragged by ₹84 crore exceptional charges (labour code provisions and cyclone-related inventory damage). Operating Metrics - ADRs up 9% YoY; occupancies improved ~300 bps YoY to 75%. - EBITDA margins maintained YoY despite one-offs. - Current occupancy ~73%, with scope for further improvement. Growth Drivers - Economic growth, rising incomes, GST cuts, RBI’s 125 bps rate reduction, and benign inflation expected to boost travel demand. - Renovations across seven properties (~350 keys) completed in Oct 2025, supporting pricing growth. - Planned addition of 218 keys by CY2027 in Puri and Bhubaneshwar. - Sapphire Residences sales in Colombo to augment growth. Long-Term Expansion - Inventory pipeline: +6,152 keys, taking total to 20,000+ by 2030. - Owned/leased inventory to rise to ~6,700 keys; managed inventory to ~13,500 keys. - Asset-light strategy to expand faster, especially in Tier 2/3 cities. - Inventory mix to shift from 40:60 (owned:managed) to 33:67 by 2030. Industry Dynamics & Valuation - Hotel demand expected to grow at 11.4% CAGR (FY25–30) vs supply growth of 9.9% CAGR, supporting pricing power. - Strong balance sheet: zero debt, ₹1,800 crore cash reserves (Sep 2025). - Estimated cash profit of ₹1,400 crore in FY27 enables inorganic growth. - Valuation: EV/EBITDA 21x FY27, ~13% discount to IHCL. - Stock looks fairly priced, better entry points may emerge.