ITC Hotels Ltd experienced a significant surge in its stock price, climbing 6% in Tuesday's trading session following the announcement of robust second-quarter results. The company's performance, which exceeded analyst expectations, was primarily fueled by a strong expansion in occupancy rates and an increase in Average Daily Rate (ADR).
Analysts highlighted that revenue per available room (RevPAR) surpassed forecasts, largely due to a 520 basis points increase in occupancy, reaching 76%. The Average Daily Rate (ADR) also saw a healthy growth of 13% to Rs 12,800. This positive trend was supported by consistent transient demand across key markets and a booming MICE (Meetings, Incentives, Conferences, and Exhibitions) business, notably boosted by events like the BRICS summit in Delhi.
Brokerages Project Significant Upside
Following the strong Q2 beat on Ebitda and margins, 13 out of 14 brokerages updated their recommendations on ITC Hotels stock, predominantly suggesting 'Buy' or 'Outperform' ratings. Ambit Capital set the highest target at Rs 240, implying a potential upside of 44% from current levels. Other prominent brokerages, including ICICI Securities, Elara Securities, JM Financial, and Axis Capital, have set 12-month targets ranging between Rs 224 and Rs 235.
Elara Securities maintained its 'Buy' rating, raising its target price to Rs 230, citing an upbeat outlook for the next 18 months driven by strong seasonal demand and anticipated heightened MICE activity. JM Financial revised its FY27 and FY28 Ebitda estimates upwards by 3-4% and projects revenue and Ebitda to grow at an 11% and 14% CAGR, respectively, over FY26–29E. This led them to increase their target to Rs 235 from Rs 225.
Strategic Growth and Expansion
ITC Hotels' asset-light strategy continues to enhance its return profile, with Return on Capital Employed (RoCE) for H1FY27 approaching 20%. The company is actively pursuing expansion, aiming to surpass 23,000 keys by 2031, which implies a 10% key CAGR. This growth includes a 3-4% CAGR for owned inventory.
Recent additions to their portfolio include the acquisition of the 72-key ITC Kumarakom (Zuri) and the conversion of the 130-key Welcomhotel Ahmedabad. Future projects are also in the pipeline, with Puri and Bhubaneswar hotels targeted for completion by the end of 3QFY28, and the large Delhi Yashobhoomi project set to commission by FY30/31. Furthermore, ITC Hotels has secured a 2.8-acre parcel in Lucknow for a new 200+ key luxury hotel and has expanded its international footprint into Dubai through a wholly-owned subsidiary, marking its second overseas market after Sri Lanka.
Robust Outlook for Management Fees
ICICI Securities estimates a 9% RevPAR CAGR alongside a management fees CAGR of 16% over FY26–29, primarily driven by new hotel openings and the continued success of the asset-light expansion model. The robust performance in F&B business and management fees, which were up 12% and 25% respectively, reflects a broad-based growth across all segments.