ITC Hotels Soied 30% From Its low. Is it still a hidden gem?

Travel Within the Country Keeps Growing, and Global Tourism is Bounce Back Stronger Than Ever.

These shifts have boosted the hospitality industry, pushing up bookings and earnings for hotel chains.

Let’s Dive ITC Hotels Today. It is a big name in India’s hospitality space, belonging to itc ltd, a large and varied business group.

Its portfolio including upscale hotels, resorts, and homestays under different brands. These offerings serve a wide range of travelers with a focus on top-notch experiences.

The stock price of itc hotels has jumped. From its lowest point in February 2025, the stock rose by an impressive 30%. That’s a steep 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 Isn Bollywood Straightforward.

ITC Hotels is a new listing, and it doesn’T have much time of a track record for earnings. This makes it hard to use the usual method of analysing its past financial data.

How do we handle this?

Well, we shift our focus to one of its closest competitors. Indian Hotels Company Ltd, or IHCL, which Owns Taj Hotels, Resorts, and Palaces, Backcomes the Natural choice to study.

Indian Hotels has a long Financial History, GIVING Us Planty of Data to Study.

But here’s the catch.

Can Hotel Stocks 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 throw their yearly profits off balance. This makes figuring out the reliable earning potential of a hotel stock through the pe ratio quite tricky.

So, what’s a better way to value them?

The usual practice for Hotel Properties is to focus on the one of their assets instead.

Indian Hotels has an average price to book (PB) Multiple of 5.6 Times in the Past Decade. This raises a key question. Is Using Book Value The Best Way to Evaluate Hotel Stocks? To answer that, let’s think about a basic comparison.

Picture a ten-yar-old car. Now, picture a ten-yar-old Thriving Hotel Property.

What’s the key distinction here?

Cars lose their Worth over time. A car boght for 15 lakhs, for example, might drop 90% in value over ten years. After that period, its market Worth could fall to just 1.5 lakhs. Account books would show that decline as depreciation.

Running a successful Hotel is a whole different game. A Hotel Purchased at 15 brus might be valied at 50 crus after ten years. Its Rise in Value Depends on Location, Brand Popularity, and Steady Income Flow.

Here’s a Strange Thing About Accounting: even when an asset gains value, it is often recorded in the books as if it lost value.

Take this example. A Property Purchased for 15 brus might grow to be worth 50 brus in ten years, Yet the books might still list it as being 5 brus.

Let’s undersrstand this. A property bought for 15 brus might now be Wort 50 brus in the market, but accounting records reduce its value to 5 Crores due to depreciation policies.

This is likely the reason high-quality Hotel Stocks often Sell at Rates Far Above Their Book Value. Investors Know the Book Value does not show what these properties are worth on the market.

For instance, a property listed at 5 brus on paper might fetch ten times that in the real world trust accounting rules show the depreciated value and not the current market price.

On top of that, well-known hotel chains benefit from brand reconstrance and customer loyalty, which drives their wish even higher. Hotel Stocks Often shows higher pristed compared to what their assets are worth on paper.

In favorite times, this difference can climb up to ten times the book value. DURING TOUGH Periods, it can drop as low as double the book value. Take the coronavirus crash as an example. Back then, Indian Hotels’ Price-to-Book Value Dropped to 2 Times.

Its stock hovered Around 70 at that time. Now, it has crossed 750, offering eleven times the return in just five years. This highlights how undervalued stocks in this sector can grow.

Over Anniest Market Cycle, Investors have paid about 5.6 times the book value to invest in Indian Hotels.

On the other hand, EIH, or East India Hotels, which runs the oberoi and trident Brands, have had a price to book ratio (PB ratio) of just three times over the past decade.

This means Indian Hotels, A Large and Varied Hotel Chain Holds A PB of 5.6 Times.

Meanwhile, Eih, A Smaller, More High-Ed and Luxury-Focused Brand, Stands at Three Times.

Where does itc hotels belong on this spectrum? Should it align more with Indian Hotels or Lean Toward Eih?

Itc hotels ranks as the second-largest chain after Indian hotels and covers a wider range of offers compared to eih. This sugges to me that its valuations should be nearer to Indian Hotels Than Eih.

This places it Around a PB Multiple of Between 3 and 5.6. Taking the average of these figures gives us a pb multiple of 4.5.

If you multiply the current book value of itc hotels with this figure, you get Around 225 per share.

ITC Hotels at Present Trades Close to 220 per share. This means it is at a small discount for an investor who thoughts its price-to-book ratio should be somehere between Indian hotels and eih.

Now some might argue it deserves a higher pb ratio if there’s confidence in a brighter future for its hotels compared to its past

Take Indian Hotels as an example. Its Current PB Ratio is 10 Times, which stands way about its long-term average of 5.6 times.

Cold 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 value a conservative investment approach, Avoid Paying Heavy Premiums Just to Bet on Future Growth. INTEAD, Value a business closer to its ten-year average multiple.

We hope this breakdown helps you in taking an informed decision about itc hotels.

Happy Investing.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.

This article is syndicated from Equitymaster.com