Jefferies has initiated coverage on ITC Hotels (ITCH) with a ‘Buy’ rating and a target price of ₹240 per share, citing strong franchise positioning, diversified brand presence, and a robust financial profile. The brokerage expects ITCH’s earnings to grow at a 19% CAGR over FY24-FY27, leading to an improvement in Return on Capital Employed (ROCE) to 12% by FY27.
Jefferies highlights that ITCH, currently the second-largest listed hotelier in India, operates under an owner/operator model with a net cash balance sheet. The company is in the process of ramping up its underutilized greenfield projects (accounting for nearly 20% of its keys) while simultaneously expanding through management contracts.
The brokerage values ITCH’s hotel EBITDA at 30x FY27 EV/EBITDA, compared to 37x for Indian Hotels Company Ltd (IHCL), and notes that ITCH’s current valuation at 20x FY27 EV/EBITDA represents a 25%+ discount to IHCL, which it believes can narrow over time.
Post demerger, Jefferies expects ITCH’s independent structure to enhance its focus on returns and growth. The company has also recently formed a new board with 50% independent directors, a move seen as a step toward strong governance. Jefferies projects ITCH’s EBITDA and PAT to grow at 16% and 19% CAGR, respectively, over FY24-FY27.
Disclaimer: The above article is for informational purposes only and does not constitute financial advice. Investors are advised to consult their financial advisors before making any investment decisions.
