Recommendation from a Hotel, Resort & Restaurants

This section gives a recommendation of a stock having stock price below Rs 150 with sound fundamentals and expected to give handsome returns over a one-year time horizon.

ADVANI HOTELS AND RESORTS (INDIA) : MAKING PROFITS WHILE TOURISM SHINES

HERE IS WHY
✓  Impressive growth in hospitality industry
✓  Catering to high-end tourists in Goa
✓  Surge in profitability

I ndia is experiencing a surge in demand for accommodations due to the rising aspirations of Indian holidaymakers and the growth in the MICE sector (meetings, incentives, conferences and exhibitions). With limited room supply, this trend has led to a significant increase in average hotel rates, including popular destinations like Goa. The industry has seen an increase in occupancy rates from 60-67 per cent compared to the previous year, with average rates recovering 37-39 per cent and revenue per available room growing 89-91 per cent.

The Indian hospitality industry’s market size is estimated at USD 247.31 billion in 2024 and is expected to reach USD 475.37 billion by 2029, growing at a CAGR of 13.96 per cent during the forecast period of 2024-2029. Taking all this into account, our low price scrip for this issue is Advani Hotels and Resorts (India) Ltd. The company was incorporated in 1987 under the name Ramada Hotels (India) and renamed Advani Hotels and Resorts (India) Limited in 1999. It owns and operates the Caravela Beach Resort Goa, an independent, 201-key, five-star deluxe golf resort. The resort offers secluded beauty and virginal beaches while maintaining modern facilities. Since its formation, the company’s sales and marketing strategy has worked very well and led to a growth of 11 per cent in Q3FY24. This is despite the fact that the demand for Goa had decreased during Q3FY24 due to Indians travelling overseas for holidays, especially to Thailand, and due to a significant reduction in the number of foreign charter tourists flying into Goa.

Advani Hotels and Resorts (India) Ltd. witnessed a remarkable 87.24 per cent increase in net sales, reaching ₹32.29 crore in Q3FY24 compared to ₹17.25 crore in the previous quarter the same year and it increased year-on-year by 11.34 per cent. This indicates a strong rebound in business activity. While the total expenditure also rose by 15.45 per cent, the jump in revenue resulted in a more significant improvement in profitability metrics. The PBIDT excluding other income, skyrocketed by a staggering 3,388.83 per cent, reaching ₹12.80 crore as compared to ₹37 lakhs in the previous quarter the same year.

It reported a year-on-year increase of 8.79 per cent. The company’s profit after tax (PAT) also saw a substantial increase of 1,986.32 per cent, reaching ₹9.31 crore as compared to ₹45 lakhs in the previous quarter the same year while on a year-on-year basis it increased by 6.36 per cent. Sustained recovery in the hospitality sector coupled with continued cost management could propel Advani Hotels and Resorts (India) toward long-term growth. On the valuation front, its shares appear expensive when compared to its own average. Its current PE ratio of 29.4 times sits significantly above the three-year median of 20.7 times.

Similarly, the price-to-book value (PBV) ratio of 12 times is higher than the industry average of 4.76 times. The recent surge in revenue and profitability explains the higher valuation. The company boasts a healthy three-year average return on equity (ROE) of 20.8 per cent and a return on capital employed (ROCE) of 24.4 per cent. It declared a 1:1 bonus in Q3FY24 and has been consistently rewarding its shareholders through the distribution of dividends over the last 10 years, excluding the year of the corona virus-triggered pandemic. The current dividend yield is 3.01 per cent. Considering all these factors, we recommend BUY..