IDBI Capital has raised its long-term target price on The Indian Hotels Company Ltd (IHCL) shares by 43 percent to Rs 200 from the current market price levels of around Rs 140 per share. The IHCL stock quoted at Rs 138.30 apiece, slipping almost 1.5 percent on NSE at 12.56 pm. The broader Nifty quoted at 11,596, down over 82 points.

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So far this year, the return on the IHCL shares remains negative with the scrip correcting over 4.5 percent. The one-year return is flat with the stock up just a little over a percent. The 10-year return on IHCL is more than 60 percent, but during the same period BSE Sensex has added more than 140 percent.

The domestic brokerage favours the stock in the domestic hospitality space due to its diverse product range, improving balance sheet and reduced losses from overseas operations.

"We like IHCL amongst the domestic hospitality space considering its diverse product offerings, improving balance sheet strength and declining losses from international operations. We estimate net sales/EBITDA/PAT growth of 7.3%/23.3%/34.7% over FY19-21E. Maintain BUY with a TP of Rs 200 valuing the stock at 20x EV/EBITDA and per share value in Taj GVK and Oriental Hotels at current market capitalization," analysts at the IDBI Capital said in a report on Tuesday.

The Indian Hotels Company has a strong inventory pipeline to support health sales growth, the report said, while adding that currently 42 hotels are in pipeline with 6,178 rooms. The IHCL recently achieved milestone of 200 hotels with more than 25,000 rooms.

"The company’s focus on increasing inventory, keeping balance sheet lighter has led to improvement in share of management contract in total pie to 42% from 35% earlier. The management reiterated its earlier stance of adding 15 hotels every year and opening 1 new hotel every month," the report said.

Furthermore, analysts at IDBI Capital are of the view that management guidance of achieving EBITDA margin of 25 percent by FY22E is achievable due to higher share of management contract in total inventory, cost optimisation initiatives and declining losses in US subsidiary.

The Tata group hospitality arm in end January reported a 25.37 percent rise in consolidated net profit to Rs 213.17 crore for the quarter ended December 2019. The company had posted a net profit of Rs 170.03 crore for the corresponding period of the previous fiscal.

Consolidated total income rose to Rs 1,408.91 crore for the quarter under consideration as against Rs 1,337.97 crore for the same period a year ago.

"In line with Aspiration 2022, the company reported seven consecutive quarters of consistent and sustained growth," IHCL Managing Director and CEO Puneet Chhatwal said.

The re-imagined brandscape enabled IHCL to add a record 24 hotels to the development pipeline, he added.

The company signed 24 hotels with an inventory of over 2,800 keys in the current financial year. This includes four Taj hotels, two SeleQtions hotels, nine Vivanta hotels and nine Ginger hotels, IHCL said.

The company managed to reduce its debt levels further and reported a net debt to EBITDA ratio of 1.76, down from 2.11 (as of FY18/19), it added.

Incorporated by the founder of the Tata group, Jamsetji Tata, the company opened its first hotel — The Taj Mahal Palace, in Bombay in 1903. IHCL has a portfolio of 197 hotels, including 40 under development globally across 4 continents, 12 countries and in over 100 locations.

(With inputs from PTI)