ITC Hotels RevPAR growth and occupancy gains drive Q2FY27 margin expansion

Investment View

Choice Institutional Equities’ October 26, 2026 update on ITC Hotels Limited retains a BUY rating and a target price of Rs 210. The broker’s positive view is based on sustained pricing power, higher occupancy, stabilisation of recently added assets, rising management-fee income and operating leverage-led margin expansion.

• ITC Hotels outperformed average industry RevPAR by 44 per cent in Q2FY27.
• Growth is supported by improved occupancy, pricing, stabilisation of new assets and a rising managed-property contribution.

Q2FY27 Operating Performance

ITC Hotels reported strong Q2FY27 operating performance. Own RevPAR increased 21.3 per cent YoY to Rs 9,700, driven by a 520 bps YoY increase in occupancy to 76.0 per cent and a 13.3 per cent YoY increase in ARR to Rs 12,800. Room revenue grew 22 per cent YoY, ahead of food and beverage revenue growth of 12 per cent, while management-fee income increased 25 per cent YoY.

Reported Q2FY27 revenue rose 25.6 per cent YoY to Rs 1,054 crore and was 7.3 per cent above Choice’s estimate. Excluding Branded Residences, core revenue grew 17.4 per cent YoY to Rs 980 crore. EBITDA increased 37.3 per cent YoY to Rs 338 crore, exceeding the broker estimate by 10.1 per cent, while EBITDA margin expanded by 274 bps YoY to 32.0 per cent and was 83 bps above estimate. Adjusted PAT increased 51.4 per cent YoY to Rs 201 crore, broadly in line with Choice’s Rs 193 crore estimate.

Branded Residences generated Q2 revenue of Rs 71 crore and operating profit of Rs 23 crore, with a 32.3 per cent operating margin, supported by continued Sapphire Residences handovers.

Portfolio Expansion and Strategic Initiatives

Portfolio expansion remains an important growth driver. ITC Hotels signed 12 new hotels in Q2FY27 and 20 in H1FY27, taking the managed pipeline to 84 hotels and around 8,200 keys. Management is targeting 250 hotels by 2031 with a 67 per cent managed mix.

• The company was allotted a 2.8-acre land parcel in Lucknow for a luxury hotel with more than 200 keys.
• Its board approved a wholly owned Dubai subsidiary, with investment of up to Rs 20 crore, to pursue UAE hospitality opportunities.

Earnings Estimates and Growth Outlook

Choice raised its FY27E revenue estimate by 1.6 per cent to Rs 4,788 crore, EBITDA by 1.8 per cent to Rs 1,642 crore and adjusted PAT by 3.2 per cent to Rs 1,050 crore. FY28E revenue and EBITDA estimates were raised by 1.5 per cent each to Rs 5,572 crore and Rs 1,995 crore, respectively.

The broker forecasts FY26 to FY29E revenue CAGR of 14.8 per cent, EBITDA CAGR of 17.4 per cent and adjusted PAT CAGR of 23.0 per cent. EBITDA margin is expected to expand from 34.4 per cent in FY26 to 36.8 per cent in FY29E.

Valuation

The Rs 210 target price is based on 22x FY28E hospitality EBITDA of Rs 1,840 crore. Choice’s valuation assigns no multiple to FY28E Branded Residences EBITDA of Rs 155 crore, adds FY28E net cash of Rs 3,730 crore and deducts minority interest.

A DCF cross-check, using a 5.0 per cent terminal growth rate and 13.4 per cent cost of equity, also supports the target price.

Key Risks

• Moderation in domestic air traffic.
• Delays in owned-pipeline execution.
• Integration and refurbishment risks for recent acquisitions.
• Lower international tourist arrivals.