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Hidden Gem: ITC Hotels - Good Q1; Demand trends likely to improve in H2 (Reco. – Buy; PT – Rs220)

ICICIdirect Research 11 Sep 2026 DISCLAIMER

ITC Hotels, established in 1975, is the second largest hotel company in India with 14,000+ room in 90+ destinations. The company is among India’s leading luxury hotel chains, with a diversified portfolio spanning the midscale to upper‑upscale to luxury segments. It also has international presence through ITC Ratnadipa (352 rooms) located in Sri Lanka
ITC Hotels is pursuing an asset-right growth strategy to expand its operating footprint from 14,372 keys to 22,000+ keys by FY31, an addition of ~7,700 keys over the next five years. Large part of room inventory (around 6,000 rooms) will be added through management contract route under the asset-light strategy by FY31.
The company’s India occupancy stood at ~72% in FY26, which is lesser compared to other premium hotels with occupancies in the range of 77-80%, which provides scope of further uptick in the occupancy in the coming years. Large focus will be on sweat some of the new rooms, which have occupancy ratio less than 70%.
The company had good start in Q1FY27 with hotel business registering 10% revenue growth driven by 8% RevPar growth. With room demand remaining good across key Indian markets, we expect the domestic business revenues to grow in double digit in FY27. We expect ITC’s consolidated revenues to grow at CAGR of 13% over FY6-28E, driven by 11% growth in the standalone room revenues , ITC Ratnadipa Sri Lanka growing at CAGR of 12% and management contract revenues growing at CAGR of 16% over FY26-28E.
EBIDTA margins to expand by ~200bps to ~37% over FY26-28 driven by stable operating performance by domestic properties and scale-up in the operation of Sri Lanka, Ratnadipa in the coming years. Overall EBIDTA to grow at CAGR of 17% over FY26-28.
The company has strong cash balance of Rs1,591cr on its books, which it can utilise for prudent capital allocation and reward shareholders with better dividend payout in the coming years.
ITC Hotels stock price has corrected by 36% from its high and is currently trading at discounted valuations of 15.5x its FY28E EV/EBIDTA. We recommend Buy on ITC Hotels with a price target of Rs220.

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