,ICICI Direct is bullish on the Tata Group’s strategic business,
. The brokerage has given a buy rating at a target price of Rs 380 which means a potential upside of 21%.
In the Q2 period of FY23, the company posted healthy revenue growth. Nevertheless, the margins as well as profitability was a tad below the brokerage’s estimates. “Revenues grew 69.2% year-on-year (YoY) to Rs 1232.6 crore. It was also up 22.4% vs. pre-Covid levels (i.e. Q2FY20) EBITDA margins expanded 800 bps from pre-Covid levels to 23.9% . It declined 590 bps QoQ. Despite lower than expected margins, it remained one of the highest ever margins so far reported in the past 10 years during Q2,” noted the brokerage report.
The brokerage highlights the following as the key triggers for future stock price performance
- Revival in foreign tourists, wedding season, G20 summit 2023 to provide further fillip to leisure and business hotel room demand, going forward.
- Under Ahvaan 2025, the company plans to have 300+ hotel room portfolio with zero net debt status. The company also aims to achieve 33%+ margins (35% for new businesses) through cost efficiencies.
- The brokerage expects revenue CAGR of 41.8% during FY22-24E. Also business is seen to recover fully to pre-Covid levels while EBITDA to surpass pre-Covid levels in FY23E; margins seen at close to 33% in FY24E.
- Improved cash flows and divestment of non-core assets to help the company grow faster.
- The company is also focussing to improve efficiency through cost optimisation. The brokerage is hence bullish on the counter and has suggested the target price of Rs 380, valuing the hotel major at 26.5x FY24E EV/EBITDA.
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