Goal: ₹230
CMP: ₹166.80
Backed by a $58 billion conglomerate, ITC Resorts is India’s 2/4 hospitality chain primarily based on operational resorts/keys. ITC Resorts operates via 6 manufacturers, with differentiated positioning; having a portfolio of ~13k operational keys and ~4.3k keys in pipeline; the upcoming pipeline predominantly contains WelcomHotel (42%) and Fortune (33%)
With 80 per cent domestic-owned stock (luxurious) and 70 per cent in tier1/metros, ITC Resorts is an opportune play on continued buoyancy in these segments. Enhancing operational effectivity, asset-light focus (over 90 per cent of pipeline) and beneficial working leverage will drive 450 bps EBITDAM enlargement over FY24-28 to about 38 per cent.
Ramp-up of ITC Ratnadipa with about $500 million funding (round 40 per cent of FY24’s capital employed) stays key. F&B presence throughout over 12 manufacturers, together with Bukhara & Dum Phukt, and wholesome industrial absorption will guarantee income buoyancy and scale back cyclicality.
One 12 months goal worth of ₹230 implies 26x 1yr fwd EV/EBITDA; don’t construct in valuation convergence to IH (round 25 per cent now vs 21 per cent on TP); although bettering RoCE (9 per cent/13 per cent in FY25/28E) and strong FCF technology (₹4,700 crore, FY25-28E after demerger) may depart room for re-rating.
Dangers: Slower-than-expected ARR development and occupancy ramp-up.
