How should one approach Indian Hotels at this point of time? As things get ironed out on the Covid front, will there be a massive surge in the stock?
Indian Hotels management articulated in its investor meet their strategy to capitalise on the business recovery, focus on the new brands and businesses and, more importantly, pursue asset light growth. We are in a revival mode. Stronger players with better balance sheets and cost controls are in a position to take advantage of the revival. This bodes extremely well for a player like Indian Hotels.
The management contracts part will add to their overall revenue kitty in the next year and even EBITDA would flow through because some of these initiatives are asset light and ROC accretive. We have a very positive view on Indian Hotels from an investment perspective because these pockets are available below their pre-Covid price points. The revival is just around the corner.
So Indian Hotels continues to be one of our preferred picks with a target price of Rs 180, which would mean an 18% upside.
Let us also discuss Titan. The management said they are looking at promising growth across the jewellery segment, watches and wearables. How encouraging is the commentary?
What we liked about Titan is that the growth in the jewellery business, on a lower base, will be more than 50%. Even the non-jewellery businesses have seen uptick as stores open up. It is a great great franchise. Given that we are in a revival mode, people would want to participate in a stock like Titan. We have a very positive view on it as a core portfolio holding.
The big talking point this morning is the Zomato IPO, which is set to open on the 14th with a price band of Rs 72 to Rs 76 per share. Is it fairly valued?
We are in a bull market and people want to latch on to anything which is a good brand and has an exciting story around it. So we are not very sure about how profitable this entire business model is, but given that there is a frenzy for good names in the IPO market the pricing looks to be pretty decent. At least from a listing gain point of view, there would be a lot of excitement. Since the size is quite large, about Rs 9,000 crore, there is going to be some scope to get allotment both in retail and HNI categories. From a listing gain perspective, it could be a good idea to get into it.
More importantly, we have an extremely positive view on Info Edge, which has seen an uptick on the back of this IPO, if it is able to unlock more value out of Zomato over the new few quarters.
What is your outlook on real estate stocks? Indiabulls Real Estate is now owned by Blackstone practically as the promoters are out. DLF can be a play on operating leverage. Oberoi Realty and Godrej Properties are expensive but debt-free.
Sobha reported extremely good sales growth of almost about 40%. Local real estate players like Bangalore-based Prestige and national players like Godrej Properties and Oberoi Realty are reporting decent numbers. Contrary to the popular perception that real estate could go through an extended period of pain, the data points are quite encouraging.
Even a highly leveraged player like Lodha could launch its IPO and repair its balance sheet. So I think that bodes very well for the sector in an environment where the risk appetite has gone up. It makes sense to focus on names like Godrej Properties, Oberoi Realty and some local players. Unfortunately, we at Motilal Oswal, do not have any specific recos on real estate names.
What are you looking out for from TCS earnings?
Most of the IT companies are saying that they will see quarter-on-quarter growth of about 3.5-4% on such a high base. They may report a little better or stable margins because they have not yet started spending on travel costs. Most global global consultancy firms like Accenture are reporting extremely good offshore traction in their businesses.
TCS management commentary should continue to be good. The visibility for next year should be good. We continue to have a positive bias. Within the IT pack, we would be more comfortable with Infosys and HCL Tech among the largecap names. When it comes midcap IT names, we like Mphasis, Cyient and Zensar.
