jhujhunwala stocks: Analysts are bullish on this Rs 667 crore-Jhunjhunwala bet. Here’s why

NEW DELHI: Tata Group firm (IHCL) is out with its annual report and the main conclusions from it are management’s focus on asset-light growth through management contracts. Revenue growth and margin expansion will go hand in hand, analysts who read the annual report said, adding that the recent guidance is realistic and achievable.

Ace investor Rakesh Jhunjhunwala and his wife Rekha owned a 2.12 percent aggregate stake in the hotel on March 31, which is valued at Rs 667 crore on Thursday.

The annual report, said:

Securities, highlights the company’s efforts to grow its existing and new businesses, improve its margins and efficiently deploy its capital to generate better returns. It sees the stock at Rs 278.

has marginally lowered its target for the stock from 292 to Rs 284. The two price targets suggest an increase of 29-31 percent from Wednesday’s closing price of Rs 215.60.

On Thursday, the scrip rose 2.97 percent, reaching a high of Rs 221.60

The company’s FY22 annual report reiterates the company’s plans to execute on its “AHVAAN 2025” strategy, which it announced in May.

The strategy is essentially focused on four key pillars, including reaching a total of more than 300 hotels in the portfolio and achieving a consolidated EBITDA margin of 33 percent in FY26 with 35 percent EBITDA share from management contracts and new businesses . The company also aims to achieve a 50:50 ratio of ownership/rental to management contract room keys and maintains a net cash balance as it pursues its growth plans.

“The AHVAAN strategy is an extension of the company’s previous Aspiration 2022 strategy, which focused on slight asset expansion and margin improvement. We believe that the growth and margin targets set by the company’s management are realistic,” said ICICI Securities.

The brokerage estimates that consolidated sales will grow 54 percent year-on-year to Rs 462 crore in FY23, which would be 104 percent of the FY20 level. It sees sales grow 18 percent year-on-year to Rs 5,450 crore in FY24 with an Ebitda margin of 32 percent.

The company said April and May revenues were 10 percent above pre-Covid levels and with continued increases in business travel and leisure, ICICI Securities expects FY23E revenue and FY24E revenue at 104 percent and 122 percent of pre-Covid (FY20) levels, respectively.

Motilal said IHCL’s asset-light model and new and redesigned revenue-generating roads, with higher EBITDA margins, bode well for an expansion of RoCE.

Like FY22, it expects a strong recovery in FY23 and FY24, led by an improvement in the ARR once economic activity normalizes; improved occupancy, led by both business and leisure and efforts to rationalize costs.

This brokerage is also seeing an increase in F&B revenues as banquets/conferences normalize and higher management contract revenues.

(Disclaimer: The experts’ recommendations, suggestions, views and opinions are their own. They do not represent the views of Economic Times)

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