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Budget Travel Boom: Why Kamat Hotels Could Be Your Ticket to Profits


kamat hotels india limited

Kamat Hotels India: A Feast for Value Investors?

I. Overall Rating & Recommendation:

Rating: 7/10 (Buy with Moderate Caution)

Recommendation: Kamat Hotels presents a compelling value proposition despite some risks. Strong financial performance, improving industry outlook, and attractive valuation warrant a buy. However, exercise caution due to potential macroeconomic headwinds and high beta.

II. Company Analysis:

Sector: Hotels & Resorts

Market Cap (as of Jan 21, 2024): ₹885 Crore

Current CMP: ₹357.20

Products: Kamat Hotels operates a chain of mid-range, family-friendly hotels across India. Revenue predominantly comes from:

  • Room Revenue (75% of revenue)

  • Food & Beverage Sales (20% of revenue)

  • Other Services (5% of revenue)

Financials:

  • Strong recent performance with 106% revenue growth and 1271% profit growth for FY23.

  • Healthy ROE (203%) and ROCE (73%) indicate efficient capital utilization.

  • Low debt-to-equity ratio (0.23) provides financial stability.


III. Macroeconomic Factors:

  • Reviving travel and tourism industry post-pandemic bodes well for Kamat Hotels.

  • Government initiatives promoting domestic tourism could further boost the sector.

  • Inflationary pressures and potential economic slowdown pose challenges.

IV. Technical Analysis:

  • Daily chart trend indicates an upward channel with breakout potential above ₹370.

  • Relative Strength Index (RSI) nearing 70 suggests some overbought conditions, warranting caution.

V. Future Predictions:

  • Assuming smooth market conditions, a CAGR of 15-20% could be achievable in the next 5 years.

  • Historical CAGR (past 5 years) for both Kamat Hotels and its index have been strong, reflecting industry recovery.

VI. Ratios:

  • Debt-to-equity ratio: 0.23

  • Shareholder ratios: ROE: 203%, ROA: 39%

  • Sortino ratio: 1.2 (moderately downside sensitive)

  • PEG ratio: 0.28 (undervalued)

  • Price-to-sales ratio: 2.74 (within industry average)

  • Beta: 1.74 (more volatile than NIFTY and hotel sector index)

VII. Conclusion:

Kamat Hotels presents a promising investment opportunity with robust financials, attractive valuation, and a favorable industry outlook. However, manage risk with moderate exposure and monitor macroeconomic developments.

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