Nomura Initiates 'Buy' on IHCL, ITC Hotels with 22% Upside Target

Nomura Tackles Hotel Stocks

Nomura has initiated coverage on two prominent Indian hotel players, Indian Hotels Company Ltd. (IHCL) and ITC Hotels, flagging them with "buy" ratings. The brokerage sees substantial upside potential, projecting up to 22.4% for IHCL and nearly 20% for ITC Hotels.

IHCL: Growth Driven by Pricing Power

For Indian Hotels, Nomura set a price target of ₹830, indicating a 22.4% jump from recent closing levels. The firm pointed to strong growth visibility in Average Daily Rate (ADR), supported by tight supply and a low dollar ADR base. Nomura highlighted improving earnings quality through asset-light expansion and the strategic development of its Ginger brand. The brokerage anticipates IHCL's revenue and EBITDA to grow at a compound annual growth rate (CAGR) of 15%-16% between FY2025 and FY2028.

ITC Hotels: RevPAR and Margins in Focus

ITC Hotels also received a "buy" call, with Nomura establishing a price target of ₹230 per share, implying a 19.7% upside. Growth in revenue per average room (RevPAR) is expected to be in the high single digits, fueled by resilient Average Room Rates (ARR) and occupancy improvements. Nomura believes this RevPAR expansion will drive margin enhancement and cost structure improvements, aligning ITC Hotels with luxury peers. Return on Invested Capital (RoIC) is forecast to climb with a focus on managed keys and the recovery of its Sri Lankan assets. Nomura projects a 15% revenue CAGR and an 18% EBITDA CAGR for ITC Hotels over FY2025-2028.

Market Context

On Tuesday, shares of Indian Hotels declined 1.8%, while ITC Hotels saw a modest gain of 0.8%. The brokerage's initiation provides a fresh outlook on these hospitality stocks.