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🏨 ITC Hotels: A Premium Play in India’s Booming Hospitality Sector

Lesson 225/225 | Study Time: 15 Min

Course: Top Quality Companies

🏨 ITC Hotels: A Premium Play in India’s Booming Hospitality Sector

📌 Company Overview

ITC Hotels, a part of the ITC Limited conglomerate, is one of India’s largest hotel chains operating under renowned brands such as ITC Hotels, Welcomhotel, Fortune, and Storii. The company focuses on providing luxury, business, and leisure hospitality across major metros and growing Tier-2 and Tier-3 cities.

🌍 Industry Outlook

India’s hospitality sector is witnessing a strong resurgence post-COVID, driven by:

Rising domestic tourism
Business travel rebound
G20 & global events
Increasing penetration of leisure travel in Tier-2/3 cities
Government focus on tourism infrastructure

With projected double-digit growth in the Indian hotel industry over the next decade, companies like ITC Hotels are poised for consistent expansion.

🕰️ Historical Expansion & Financial Performance

Year	Hotels	Sales (₹ Cr)	Net Profit (₹ Cr)	NPM %
FY24	110	3,034	423	13.9%
FY25	118	3,560	637	17.9%
Trailing FY26	143	3,653	683	18.7%

🔺 Hotels count is expanding at ~12 per year.
📈 Sales and profit show consistent upward momentum.

📊 Valuation Trends – PE & PBV History

Price-to-Earnings (PE)

Year	Low PE	High PE
FY25	51	67
Trailing FY26	55	80

Price-to-Book Value (PBV)

Year	Low PBV	High PBV
FY25	3	4
Trailing FY26	3	5

These valuation ranges help define historical fair price zones for long-term investors.

📈 Q1 FY26 Performance Snapshot

Metrics	Q1 FY26	Q1 FY25	YoY Growth
Sales (₹ Cr)	743	650	14.3%
Profit (₹ Cr)	148	102	45%
EPS (₹)	0.72	0.49	23%
EBITDA Margin	19.92%	15.69%	+4.23%
Interest Coverage	58x	48x	↑ Strong

💼 Hotel additions, stronger room rates, and tight cost control are driving profitability improvements.

🔍 Cost Structure Analysis – Q1 FY26

Cost Head	Q1 FY26	% of Total Cost	Growth YoY
Food & Beverage	₹72 Cr	12%	7%
Employee Expense	₹168 Cr	29%	22%
Depreciation	₹73 Cr	13%	-3%
Other Expenses	₹266 Cr	46%	13%
Finance Cost	₹3 Cr	0%	0%
Total	₹582 Cr	100%	12%

🔸 Employee and other overheads are key cost drivers but remain well-managed.

📅 FY26 and Long-Term Estimates

Year	Hotels	Sales (₹ Cr)	Profit (₹ Cr)	EPS	Margin %
FY26E	152	4,130	823	3.9	19.9%
FY30E	200	8,563	1,447	6.9	~17%
FY35E	260	17,224	2,911	13.9	~17%

📈 The long-term view assumes steady hotel expansion, 20% sales and profit CAGR, and healthy EPS compounding.

💰 Valuation Estimates – Price Ranges

Year	EPS	BV (₹)	Low (PE)	High (PE)	Fair PE	Low PB	High PB	Fair PB
FY26E	3.9	₹55	₹98	₹236	₹157	₹166	₹387	₹277
FY30E	6.9	₹115	₹173	₹415	₹277	₹344	₹803	₹574
FY35E	13.9	₹231	₹348	₹835	₹557	₹692	₹1616	₹1154

⚠️ Note: These are only valuation reference ranges based on historical PE/PBV.

📦 Portfolio Weightage Consideration

Parameter	Value (%)
Weight @ EPS	0.90%
Weight @ Book Value	1.49%
Weight @ PEG	1.12%
✅ Actual Allocation	1.17%

⚖️ Balanced allocation ideal for long-term portfolio due to moderate risk and scalable growth.

📉 Technical Chart Overview

💡 Currently trading at ₹233, ITC Hotels is in a steady uptrend with rising support zones and improving volume.

✅ Conclusion – Long-Term Risk & Reward

📈 Growth Positives:

Consistent hotel additions
Expanding margins from ~14% to ~20%
Strong ICR and negligible finance cost
India’s booming travel and tourism industry
Long-term brand equity under ITC umbrella

⚠️ Risks to Watch:

High valuations (PE ~60–80x)
Sensitive to economic cycles & travel restrictions
Cost inflation in F&B and manpower
Real estate and capex-intensive model

🎯 Ideal for investors looking at 5–10 year wealth compounding with patience. SIP-style accumulation strategy preferred.

📢 Disclosure

This blog is meant for educational and informational purposes only. All projections are based on publicly available data and reasonable assumptions. This is not a stock recommendation. Investors are advised to perform their own due diligence.

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Piyush Patel

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