ITC -Hotelle has risen 30% of its low. Is it still a hidden gem?

Copyright © HT Digital Streams Limit all rights reserved. EquityMaster 5 min Read 05 Jun 2025, 04:05 IST ITC Hotels is a big name in India’s hospitality space, which is to ITC Ltd. (Photo: Bloomberg) (Mint_print) Summary hotel supplies in India belong, riding on a wave of success. Do you have to bet on ITC Hotelle now? Discover … Why drive hotel shares in India with a wave of success? The answer is not too complicated. The Indian economy is thriving. People have more money to spend. Travel within the country is still growing, and global tourism bounces stronger than ever. These shifts boosted the hospitality industry and gained discussions and earnings for hotel chains. Let’s dive into ITC hotels today. This is a big name in India’s hospitality space, which belongs to ITC Ltd, a large and varied business group. The portfolio contains luxury hotels, resorts and homes under different brands. These offers serve a wide range of travelers focusing on the best experiences. The share price of ITC hotels jumped. From the lowest point in February 2025, the share increased by an impressive 30%. This is a sharp increase in a short time. This raises an important question: Do investors still see a good balance between risk and reward with ITC hotels? The answer is not simple. ITC Hotels is a new list, and it doesn’t have much of a record for earnings yet. This makes it difficult to use the usual method to analyze its financial data in the past. How do we handle it? Well, we shift our focus to one of its closest competitors. Indian Hotels Company Ltd, or IHCL, which owns Taj hotels, resorts and palaces, becomes the natural choice to study. Indian Hotels has a long financial history, which gives us a lot of data to study. But here’s the catch. Can hotel shares be judged just by looking at their price-to-earnings or PE ratio? We don’t think so. Hotel profits swing. A pandemic economic slowdown, or even a local event, can bring their annual profits out of balance. This makes the reliable earnings potential of a hotel supply through the PE ratio quite troublesome. So what is a better way to appreciate it? The usual practice for hotel properties is to focus on the value of their assets. Indian Hotels has had an average price over the past decade to discuss (PB) multiple of 5.6 times. This raises a key question. Is the use of book value the best way to evaluate hotel supplies? Let us think about a basic comparison to answer it. Suggest a ten -year -old car. Now imagine a ten-year-old flowering hotel property. What is the most important distinction here? Cars lose their value over time. For example, for example, a car bought for £ 15 lakhs could fall by 90% in value in ten years. After that period, the market value can drop to just 1.5 lakhs. Account books would show that the decline as depreciation. Managing a successful hotel is a very different game. A hotel bought at £ 15 crores can be valued at £ 50 crores after ten years. The increase in value depends on the location, branding popularity and steady revenue flow. Here is a strange thing of accounting: even if an asset earns value, it is regularly recorded in the books as if it has lost value. Take this example. A property purchased for £ 15 crores may be worth £ 50 crores in ten years, but the books can still be worth it as £ 5 crores. Let’s understand it. A property purchased for £ 15 crores is perhaps £ 50 crores in the market, but accounting records reduce its value to £ 5 crores due to depreciation policies. This is probably why high -quality hotel shares often sell at rates far above their book value. Investors know that the book value does not show what these properties are worth on the market. For example, a property listed on £ 5 crores on paper can reach ten times in the real world because accounting rules show the depreciated value and not the current market price. In addition, well-known hotel chains benefit from brand recognition and customer loyalty, which drives their value even higher. Hotel shares often show much higher prices compared to what their assets are worth on paper. In favorable times, this difference can rise to ten times the book value. During difficult periods, it can drop as low as the book value. Take the Coronavirus crash as an example. At the time, the price value of Indian hotels dropped to 2 times. The stock had about £ 70 at the time. Now it has crossed £ 750, offering the return in just five years. It highlights how undervalued shares in this sector can grow. Over a whole market cycle, investors paid about 5.6 times the book value to invest in Indian hotels. On the other hand, EIH or East Indian hotels, which run the Oberoi and Trident brands, had a price -to -book -ratio of just three times over the past decade. That means Indian hotels, a large and varied hotel chain has a 5.6 PB PB. Meanwhile, EIH, a smaller, more high and luxurious focused brand, stands three times. Where does itc -hotels on this spectrum belong? Should it be more in line with Indian hotels or lean to eih? ITC hotels are the second largest chain to Indian hotels and cover a greater variety of offers compared to EIH. This indicates to me that its valuations should be closer to Indian hotels than eih. This places it around a PB multiple of between 3 and 5.6. If we take the average of these figures, we give a PB multiple of 4.5. If you multiply the current book value of ITC hotels by this figure, you will get around £ 225 per share. ITC hotels are currently around £ 220 a share. This means it is a small discount for an investor who thinks that the price-to-book ratio should be somewhere between Indian hotels and eih. Some may now argue that it deserves a higher PB ratio if there is confidence in a better future for ITC hotels compared to the past. Take Indian hotels as an example. The current PB ratio is ten times, standing above its long-term average of 5.6 times. Can we think of something similar with ITC hotels? Maybe we can use a multiple like 8 times instead of the 4.5 times we calculated earlier? If you appreciate a conservative investment approach, you should avoid paying heavy premiums just to bet on future growth. Instead, appreciate a business closer to its ten -year average. We hope this collapse helps you make an informed decision on ITC hotels. Happy investment. Disclaimer: This article is for information purposes only. It is not a recommendation for stock and should not be treated as such. This article is syndicated from equitymaster.com, captures all business news, market news, news reports and latest news updates on Live Mint. Download the Mint News app to get daily market updates. More topics #hotel shares #itc Hotels #EquityMasters Read next story