The brokerage house JM Financial has turned constructive on India’s hotel sector. According to the recent report by them, the broader structural outlook for hospitality remains intact although there was some slowdown in recent months. The brokerage house sees as much as 79% upside potential in select stocks.
As per the brokerage report, strong domestic demand is supporting occupancies, while international travel disruptions are weighing on growth.
“The fourth quarter saw robust demand in February following a relatively soft January, with occupancies rising to 70–72% (up 200bps YoY) with healthy 8–10% YoY growth in ARRs,” the report noted.
Let’s take a look at the stocks in focus in the brokerage radar and the rationale behind it –
JM Financial top hotel sector stock picks: Check Target prices and upside potential
JM Financial in its report has maintained a positive view across a basket of hotel sector stocks.
For Juniper Hotels, JM Financial has given a ‘Buy rating with a target price of Rs 390, implying an upside potential of 79%,
In the case of Chalet Hotels, the brokerage has given a ‘Buy’ rating and set a target of Rs 1,110 from the current levels, indicating a 44% upside potential. Similarly, JM Financial has maintained a ‘Buy’ on Ventive Hospitality with a target of Rs 920, translating a 51% upside potential from the current levels.
The brokerage house has also given a ‘Buy’ rating to Brigade Hotel with a target of Rs 95, suggesting an upside potential of 51% from the current levels.
Among larger players, JM Financial has given a ‘Buy’ on Indian Hotels Company (IHCL). It has set a target price of Rs 850 to this stock, suggesting a 33% upside potential from current market price.
Lemon Tree Hotels also received a ‘Bu’ rating from JM Financial with a target price of Rs 165, translating to a 44% potential gain.
For ITC Hotels, the brokerage has set a target of Rs 235 with a ‘Buy’ rating. This implies a 52% upside potential from the current market price.
Leela Hotels, another key player, the brokerage has set a target price of Rs 600 to the stock with a ‘Bu’ rating. This translates to a 40% upside potential from the current levels.
The brokerage has also highlighted its preference within the sector. “Our preferred medium-term picks are Leela and Chalet,” it said, pointing to stronger visibility over the medium term.
JM Financial on the demand trends: Strong February, weaker March
The March quarter showed a shift in momentum. While February saw strong demand, March was impacted by global developments.
According to the JM Financial report, “Our channel checks suggest a high-to-mid single digit decline in Revenue Per Available Room (RevPAR) for Mar’26 impacted by geopolitical tensions.”
The report noted that disruptions in international travel and large events played a role.
As a result, growth expectations have been revised. “We expect the industry RevPAR growth to moderate 5–6% (12–13% in Q3) with similar growth expected in Q1FY27 estimates,” the brokerage added.
JM Financial on key growth driver in the sector: company specific trends and margins
The brokerage expects steady growth across its coverage universe. According to the brokerage report, Lemon Tree Hotels is likely to lead same-store growth.
“We expect the highest same-store RevPAR growth for Lemon Tree (9%), followed by Ventive, Leela and Juniper (~7%),” added JM Financial in its report.
At the same time, expansion strategies are also supporting revenue growth. “We expect our coverage to report 11% YoY growth in core revenue led by Ventive (15% YoY, due to new acquisitions), followed by IHCL (11% YoY, supported by 8% growth in room inventory and growth in fee business) and Leela (11% YoY),” the report said.
However, not all companies are equally placed. According to the brokerage report, companies with higher exposure to international travel or specific cities may face pressure.
“Chalet and Brigade Hotels are expected to see a flat-to-slight decline in RevPAR,” noted JM Financial report.
Margins are expected to remain broadly stable, though some companies may see pressure due to costs and operational factors. “EBITDA margins likely to be flat YoY,” the report added.
For instance, Lemon Tree may see some margin compression due to renovation costs and tax-related impacts. Similarly, companies like IHCL and Chalet could face some pressure due to lower operating leverage amid the March slowdown.
What investors need to watch
Overall, the brokerage house JM Financial remains cautiously optimistic.
The brokerage also highlighted where near-term outperformance could emerge. “For the near term, relative performance shall shift in favour of the companies with low FTA dependence (Lemon Tree),” it said.
At the same time, risks remain. “Any moderation in ARR growth (as rates up ~45% from pre-covid levels) and an unexpectedly sharp slowdown in the broader economy remain the key risks to our call,” the report added.
Disclaimer: The stock target prices and ratings mentioned in this report are based on analysis by JM Financial and are for informational purposes only. Investing in the hospitality sector involves market risks, including fluctuations in occupancy rates and international travel trends; please consult a SEBI-registered investment advisor before making any buy, sell, or hold decisions. This content does not constitute a formal offer or solicitation for investment.
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