Indian Hotels Company (IHCL) reported a resilient performance in Q1FY27 with consolidated revenue growing by a strong ~14.6% y/y. Despite global macroeconomic headwinds and West Asia conflicts, which impacted international business and flight connectivity, the company maintained strong momentum through a resilient domestic travel market, with standalone revenue growing by ~17.9% y/y during the quarter. The management expects the strong momentum to continue in Q2FY27 as well as FY27. Currently, we believe the hotel industry is transitioning from a hypergrowth phase to a stable yet sustainable growth, with IHCL mirroring this trend, resulting in ~8-10% y/y RevPAR growth (LFL basis), with incremental growth from renovation-led ARR expansion (~Rs20bn spent over last ~2 years, completing upgrades across major properties in Delhi, Mumbai and Goa etc.) and acquisitions (strong ~Rs44.4bn cash position). Factoring in the strong quarterly performance, we increase our EBITDA estimate by 3.7% and 9% for FY27 and FY28, respectively. Accordingly, we continue to maintain BUY rating on the stock with a revised TP of Rs845 (from Rs765 earlier), valuing it at ~26x FY28e EBITDA.

Strong Quarterly Performance Despite Macro Headwinds: The company’s standalone/consolidate revenue grew by ~17.9/14.6% y/y to ~Rs12.3/23.4bn, (which was ~2.3% above ours and 1.8% above street estimates), led by ~14% y/y growth in RevPAR to ~ Rs11,800 with occupancy increasing by ~600bps y/y to ~82%. Reported consolidated EBITDA grew by ~16.8% y/y to ~Rs6.7bn with margin improving by ~60bps y/y to ~28.8% (in-line with estimates). For hotel segment, absolute EBITDA grew by ~21% to Rs6.9bn. For TajSATS segment, margin stood at ~20.6%.

Renovation Cycle Largely Completed with Visible Benefits in Q1FY27: Over the last two years, the company has done significant renovation (~Rs20bn) most of which has been completed with major upgrades undertaken in Oct-25 across multiple properties including Taj Palace Hotels (New Delhi), Taj Fort Aguada (Goa), President Hotel (Mumbai), Taj Bengal (Kolkata) and Taj West End (Bengaluru). We started to see the positive impacts of these renovations in Q1FY27 with RevPAR growth of ~14%.

Outlook and Valuation – Revenue-led Operating Leverage to Aid Margin Expansion: We expect the company’s revenue to clock ~15% CAGR over FY26-28e with ~72.1% occupancy in FY28e and 8-10% ARR growth. As majority operating leverage from reduction in employee expense, Power & Fuel cost already played out over FY20-25 (leading to ~1,155bps expansion in EBITDA margin to ~33.2% in FY25), we expect only revenue-led leverage to kick-in, with margin expanding to ~35.5% by FY28e (vs. ~32.6% in FY26), leading to ~21.4% EPS CAGR over FY26-28. Hence, we continue to maintain BUY rating on IHCL with a revised TP of Rs845, valuing the stock at ~26x FY28e EBITDA. Key Risks: (a) Lower demand due to slowdown in economy; and (b) external factors including terrorist attacks and epidemics etc.