Shares of hospitality company Royal Orchid Hotels Ltd. (ROHL) gained as much as 7 percent on Tuesday after brokerage Nuvama Wealth Management initiated coverage on the stock with a ‘Buy’ rating and a price target of Rs 433, indicating a potential 92 percent upside to the stock.

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Nuvama in a note mentioned that strong occupancy is likely to aid the hospitality industry.

The brokerage expects Royal Orchid's revenue to grow at a compounded annual growth rate (CAGR) of 45.9 percent during the financial year 2022-2025 period.

The accounting rate of return (ARR) of the company is at 111 percent of the pre-pandemic levels.

The operational cash flows are expected to grow three times (3x) from Rs 39 crore last year to Rs 98 crore by financial year 2025, according to Nuvama's note.

Rating agency ICRA last week assigned a stable outlook with A- rating to the bank facilities of Royal Orchid Hotels on the back of the company’s strong operating and financial performance during the December quarter and anticipated sustenance of the same given the healthy demand outlook for the hotel industry in the next 12-18 months.

ICRA noted that improved operating leverage and sustenance of cost-optimisation measures undertaken by the company during the pandemic period have resulted in healthy improvement in margins and consequent strengthening of the company’s debt metrices and liquidity profile.

Shares of Royal Orchid are currently off the day's high but are trading with gains of 3.7 percent at Rs 234.10. The stock is down 10 percent for the year so far.

(Edited by : Rukmani Krishna)