sharekhan on indian hotels

The growth rate in ARR would not be the same as in the
last two years.Some part of the new inventory is expected
to hit the market in FY2009, thus we expect a modest
increase in the ARR in FY2009.With all the Taj properties
at +70% OR in FY2007, there exists little headroom for
growth.We expect the OR to come down in FY2009 with
the new supply coming in.

The tight demand-supply scenario in the hotel industry lends
a positive bias to the ARR in the short term and we expect
IHCL (the largest hotel company in India) with its pedigree
of hotels to be the key beneficiary of this uptrend. Though
we also believe that in the first half of the current financial
year, the effect of the rupee's appreciation would be visible
till the contracts are revised in September-October 2007.
At the current market price of Rs138 the stock is quoting at
a PER of 19.1x FY2008E consolidated EPS of Rs7.2 and 15x
FY2009E consolidated EPS of Rs9.1. We maintain our Buy
recommendation on the stock with a price target of Rs180.