Hospitality Stocks to Watch Out as Unlock Theme Gradually Unveils

  • Stock Market Analysis
  • Editors Pick

The world is still struggling to come out of this Covid-19 pandemic. Among the worst-hit sectors are tours and travel, aviation, and hospitality. Last year’s lockdowns witnessed hotel occupancy rates nearing zero. However, the situation is gradually changing for good. The second covid wave has been receding with India reporting less than a tenth of cases seen in May’s peak. With the Government of India’s decision to open vaccination to all adults aged 18 and above, vaccine shortage remains a concern. India administered around 8.6 million shots on June 21. Barring China, that was a record on a per-day-vaccinations basis for any nation. About 29% of Indian adults have received at least one shot of the Covid-19 vaccine. Among these vaccinated adults, around 61% with age over 45-years, and 67.5% of the population with age over 60 years, were given at least one shot of a Covid-19 vaccine.

Declining Covid-19 cases, expediting the vaccination drives, and gradual unlocking of markets have given some ray of hope to the hotel industry. As most of the states have announced step-by-step unlocking people have started leisure activities and business tours. We believe that in the days to come, hotel industry stocks should see an upward trend compared to the core tour & travel and aviation sector stocks. Here are the shortlisted 3 stocks from the hospitality sector which should head northward going forward. 

Indian Hotels Co. Ltd (NS: IHTL )

Indian Hotel Company is the largest hospitality group in India in terms of market capitalization. The group has several hotels in the luxury, upscale to midscale hotel segment. Taj, Vivanta, and Ginger hotels are some of the popular hotel names which are owned by Indian Hotel. We expect this stock to gain from the unlocking theme that is being played out by many Indian states. The company has recently signed a management contract agreement with Bengaluru Airport city for two hotels at Bengaluru international airport. The hotels will be operational by 2025 and will have an inventory of 775 rooms.

Indian Hotel Company’s stock price was around Rs. 79 a year back and currently trading at Rs 141. This translates into a rise of around 78%. July 1’s closing price of Rs. 141 represents a 6% discount to a 52-week high of Rs. 151. With a steady rise in domestic travel and tourism, the stock is poised to move upwards.

EIH Ltd (NS: EIHO )

EIH Ltd is a chain of luxury hotels, the majority of its stock is held by The Oberoi group. The company operates the hotels in the brand name of Oberoi and Trident (NS: TRIE ). EIH has reported a consolidated total income of Rs. 230.77 crore for the quarter ended March 2021, up around 18.5% on a quarter-over-quarter basis. In the Covid-19 pandemic, it’s important to watch out for quarter-on-quarter growth for the hospitality companies rather than year-over-year growth. With a strong balance sheet and hotels in key cities across India, EIH boasts a strong ability to generate cash flows from core business. Note that Foreign Portfolio Investors have been steadily increasing their stake in EIH. This is a sign of their confidence in the stock’s journey ahead.

Lemon Tree Hotels (NS: LEMO )

Lemon Tree Hotel is India’s largest hotel chain in the mid-priced hotel sector. Most of the company’s hotels are located in non-metro towns. Very recently, Lemon Tree has signed an MOU with the Ministry of Power for implementing energy efficiency and conservation measures at their selected properties. The top line of the company for the quarter ended March 2021 went up by 39.1% to Rs 95.2 crores. In a year, Lemon Tree Hotel’s stock price almost doubled closing at Rs. 42.5. Considering its 52-week high of Rs. 49.5, the company’s stock is trading at a 14% discount.

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  • Kannappan Ramanathan @Kannappan Ramanathan
    How did you guys miss Sinclairs.
    Like 0
  • Sandeep Narasimhan @Sandeep Narasimhan
    It is very much misleading retailers by comparing last year growth numbers. Especially with slumo start of last FY. You should compare 3yr return cycle for any investment.
    Like 0
  • Kapil Sharma @Kapil Sharma
    Mhril is also good u can go for it
    Like 0
  • Sachin Kathare @Sachin Kathare
    What abt mhril ?
    Like 0

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