Buy Indian Hotels; target of Rs 870: Motilal Oswal

Moneycontrol • 10 days ago

Original source

Key Investment Pillars

  • Domestic demand growth: IH's domestic hotel business has shown a 28% YoY growth in RevPAR, driven by resilient domestic demand and large MICE events. The company expects this trend to continue, with a strong wedding calendar and increasing MICE activities in India.
  • Asset-light expansion: IH has a pipeline of 34,800 keys, with 81% being asset-light (management contracts and leases). This expansion is expected to drive sustained growth momentum.
  • Ginger brand growth: The Ginger brand has crossed 100 operational hotels and is on track to reach 150 hotels by the end of FY27. This growth is expected to improve Ginger's margins from FY28.
  • International segment recovery: IH's international portfolio is expected to recover in H2FY27, driven by the completion of renovation work at key properties and a gradual recovery in demand.

Thesis Validation Checklist

To validate the investment thesis, investors should watch for the following signals over the next 12 months:

  • Sustained growth in RevPAR: A continued increase in RevPAR, driven by domestic demand and MICE activities, would indicate the strength of IH's business model.
  • Asset-light expansion: The successful execution of IH's asset-light expansion strategy, including the integration of acquired properties, would be a key indicator of the company's growth potential.
  • Ginger brand performance: The performance of the Ginger brand, including its ability to reach the target of 150 operational hotels, would be an important indicator of IH's growth prospects.
  • International segment recovery: A recovery in IH's international portfolio, driven by the completion of renovation work and a gradual recovery in demand, would be a positive signal for the company's growth prospects.