Leela Jumps Over 4% as Nomura Backs Hospitality Stocks Ahead of Q1 Earnings Wave

Leela Jumps Over 4% as Nomura Backs Hospitality Stocks Ahead of Q1 Earnings Wave​

Hotel stocks saw a positive trading session on Monday, July 6, following a bullish projection from Nomura on the Indian hospitality sector for June. The brokerage highlighted domestic demand resilience despite international travel challenges, making several luxury players stand out.

Leela Palaces Hotels & Resorts surged to Rs 495.55, marking a gain of 4.17%. Indian Hotels and ITC Hotels also traded higher on the NSE, with the latter gaining 0.40% to reach Rs 179.33, and Indian Hotels increasing by 0.72% to Rs 733.85.

Nomura’s View: Domestic Demand Drives Hospitality Sector Rally​

Nomura noted that domestic demand across hotels proved fairly resilient. This resilience was instrumental in offsetting the negative impact of international travel concerns related to the Middle East conflict. The brokerage specifically pointed out that domestic luxury segment hotels are successfully benefiting from leisure demand.

The firm reiterated its sector outlook, listing Leela as the top pick, followed by Indian Hotels and then ITC Hotel. Nomura maintained a 'Neutral' rating on Phoenix Mills amidst this positive sectoral assessment.

Profitability Outlook for Leading Hospitality Chains​

Nomura provided detailed performance forecasts across various players in the hospitality space, projecting strong results leading into Q1. For Leela Palaces, the brokerage expects it to deliver the strongest June quarter among hotel operators.

Leela is forecasted to achieve a 14% year-on-year revenue growth and 16% EBITDA growth. Nomura projects Indian Hotels will report similar figures for both revenue and EBITDA, estimating 13% growth for each. Chalet was also factored into the forecast, expected to show 10% revenue growth and 12% EBITDA growth, excluding its residential business.

Operational Drivers Cited by Nomura​

The brokerage detailed specific operational factors supporting the growth estimates for key companies. For ITC Hotels, Nomura anticipates that hospitality segment revenue and EBITDA will grow by 8% year-on-year. When factoring in revenue from the residential segment, the firm forecasts a higher growth rate of 22% for both revenue and EBITDA.

On Indian Hotels, Nomura cited several key drivers for its expected performance. These include resilient average daily rates (ADR) and revenue per available room (RevPAR). Growth is also expected from the stabilization of new properties like Ginger Ekta Nagar and Vivanta Ekta Nagar, along with operational rooms at Taj Palace, New Delhi.

Sector Performance Expectations for Phoenix Mills​

While focusing on hotel performance, Nomura provided a separate outlook for Phoenix Mills. The brokerage expects consumption growth to reach 27% year-on-year for the company. However, the firm cautioned that revenue and EBITDA growth are likely to be lower at 14% and 15%, respectively, as retail income is currently trailing consumer growth.