Pratik Dalal of Emkay Share Brokers gives his favourite picks in the hotel sector and the reasons why he is bullish on them.
Excerpts from CNBC-TV18's exclusive interview with Pratik Dalal:
In the frontliners, what is it that you like at this point?
In frontliners, I think EIH is better valued. Companies like Leela and Indian Hotels have appreciated a lot in the last two weeks, primarily because of the split coming up. Leela is already an ex-split and Indian Hotels is going to be an ex-split in some time.
Leela can appreciate a bit more from here, but from valuations perspective in the frontliners, EIH is doing well. In the secondary segment, stocks like Jaypee Hotels and Kamat Hotels are a bit undervalued than their peers and one can see more appreciation in these counters.
What are your best picks in the midcap space?
My best picks, particularly at the current valuations would be EIH in the premium segment. Kamat Hotels and Jaypee Hotels in the mid-segment.
What kind of valuations are you looking at in these hotels?
EIH is currently trading at a P/E of 20 whereas Indian Hotels and Leela are currently trading at a P/E of 41 and 30,
From a long-term perspective, all these hotels look good because their earnings model is quite attractive and the growth that the sector per se had seen in the first quarter is quite good.
When we analysed, around 12 hotels in the sector saw a revenue growth of 30% in the first quarter and PAT growth of 110%.
So per se, based on increased ARRs and occupancy rates, we are looking at appreciation in all these counters from a long-term perspective.
At your brokerage, are you largely pushing midcap stories at this point to your clients?
Yes, we are pushing midcaps because midcaps have primarily not performed as well as the Nifty in the last one-year. From its recent peaks, when the markets have seen a downfall, midcaps have depreciated more than the Nifty Index. So we are pushing midcaps from our brokerage house.
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