BUY INDIAN HOTELS CMP RS 50 , TARGET RS 117
At Rs 50, the stock trades at a price to earnings multiple of 9.9 times our estimated FY11 consolidated earnings. The price is lower than its recent right issue offering of Rs 70 per share.
IHCL is the most visible among all its peers in the Indian hotel industry. Its historical focus on the luxury segment has rewarded the company over time, as realisations from this segment are always higher than other segments. Its brand together with its wide reach and choice of properties warrant a higher valuation band for the company. It is also entering new segments like budget and mid market offerings.
Further it is spreading its wings to international areas to establish 'Taj' brand in these regions and position itself as a luxury brand in the global markets. The company has lined up major expansion plans over the next 3 to 4 years. Also, some of its subsidiaries are expected to turn profitable.