MOSL: INDIAN HOTEL (Buy)-On track to turn ‘Aspiration 2022’ into reality-Industry dynamics favorable
INDIAN HOTEL: On track to turn ‘Aspiration 2022’ into reality; Industry dynamics favorable
(IH IN, Mkt Cap USD2.3b, CMP INR137, TP INR189, 38% Upside, Buy)
We attended Indian Hotels Company's (IH) Capital Markets Day. Key highlights:
- IH remains confident about achieving its 'Aspiration 2022' goal of being an iconic and profitable hospitality company.
- As part of this pivotal program, the company targets EBITDA margin expansion of 800bp to 25%, which will be supported by (a) industry tailwinds (IH's ARR increased 8% in the free individual traveler segment; took an ARR hike of 8.5% in the corporate segment in Jan'19) and (b) cost reduction (by 3-5%).
- IH rebranded and relaunched the Ginger Goa hotel in Dec'18, post which the ARR has increased by 30-40%; EBITDA margin is also likely to improve as costs have not increased proportionally. In FY20, the company plans to rebrand 14 Ginger hotels.
- IH intends to centralize its laundry and other common facilities. It has hired Siemens to reduce power cost at its 20 key properties.
- The company plans to open a 400-room Ginger hotel on its existing land in Mumbai with a capex of INR2b. At the Connaught Hotel, it plans to increase rooms to 104 from 85 now and put one floor for commercial leasing.
Indian Hotels is primarily engaged in the business of hoteliering and air catering. Co. operates under the brand "Taj Hotels Resorts and Palaces"and runs the hotels under the brands "Taj", "Gateway" and "Ginger" hotels. As of Mar 31 2010, Taj Hotels Resorts and Palaces was comprised of 66 hotels in 42 locations across India with an additional 16 international hotels in the Maldives, Malaysia, Australia, U.K., U.S., Bhutan, Sri Lanka, Africa and the Middle East. Co. also operates Taj Sats Air Catering Ltd. as a joint venture with Singapore Airport Terminal Services, a subsidiary of Singapore Airlines. Additionally, Co. operates the Indian Institute of Hotel Management, Aurangabad.
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