Jefferies maintains Buy on ITC Hotels after it delivered healthy Q1 numbers. The price target has been revised upwards to Rs 270 per share from Rs 240 per share earlier. This implies about 18% upside for the ITC Hotels share price from current levels. The Q1 earnings growth was driven by robust 13% growth in revenue per available room, scale-up in the Sri Lanka project, and higher other income. Jefferies has, as a result, revised the EBITDA estimates higher. The company’s focus on scaling to 20,000+ keys by 2030 is another positive trigger, as per Jefferies.

Jefferies on ITC Hotels: Strong operating performance

Jefferies, in its report, highlighted the strong operational performance by ITC Hotels in Q1. The top line increased 16% while the Q1 EBITDA grew 19% YoY. Higher other income boosted the Q1 PAT, up 54% YoY. This was on the back of treasury income accruing from cash reserves at Rs 1,900 crore (as of FY25 end).

Additionally, despite a soft May for the hospitality sector as a result of global developments, ITC Hotels delivered strong revenue per available room. The average room rate grew 9%.

Jefferies on ITC Hotels: Scale-up of Sri Lanka Project

The revenue from ITC Hotel’s Sri Lanka business is another positive, as per Jefferies. The ITC Ratnadipa revenue shot up 40% YoY. The company had commenced the 352-key greenfield hotel in Sri Lanka in April 2024, and the occupancy rate now shot upto 50% (similar to Q4, a seasonally much stronger quarter compared to Q1).

For the 132 luxury apartments in the Sapphire Residences Project (adjacent to Ratnadipa Hotel) in Colombo, ITC Hotels is executing a sales agreement “but is expected to record in Rev/EBITDA from H2FY26, as the handover of the apartments starts,” Jefferies added.

Jefferies on ITC Hotels: Expansions on track

Moreover, Jefferies highlighted that the overall expansion work for ITC Hotels is on track, and this supports their ‘Buy’ call. ITC Hotels completed 8 signings during Q1, taking total signings to 55 hotels in the last 24 months. The demerged hotel business of the larger ITC Group also crossed the 200+-milestone hotel portfolio this quarter, including a pipeline of 58 hotels, and targets a footprint of 20,000 keys by 2030.

The capex for FY26 is slated at Rs 400 crore (in line with management guidance of 8-10% of sales).

Overall, Jefferies believes that ITC Hotels holds a strong No. 2 slot in the listed hotels space in India, “fairly diversified across metrics and slated to benefit from cyclical recovery in the hotel sector.”

They outlined that the near-term growth drivers include “scale-up of recent greenfields and increase in share of Asset Light. With the demerger from the parent behind, the delivery of performance as an independent entity will lead to a re-rating of the stock.”

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