In the ever-evolving landscape of the hotel industry in India, one company stands out for its unique business model and growth potential. Samhi Hotels, a company that recently had its IPO in September, has been making waves with its strategic approach and strong performance in the market. The focus was on the multi-year upcycle that had started in the hotel industry, leading to significant returns for key stocks in the market. One such company that stood out was Sami Hotels, which had its IPO in September 23 at a price of Rs. 126. Since then, the stock has been on a strong uptrend, currently trading at around Rs. 218.
Samhi Hotels Company Background
Samhi Hotel Limited was incorporated in 2010 as a hotel chain. Currently, the company operates 31 operating hotels across 14 different locations with over 4800 available rooms. The IPO will open on the 14th of September, close on the 18th of September, allotment decision will be made by the 20th, refund process will start on the 20th, shares will be credited by the 25th, and the tentative listing date is the 27th of September.
The Business Model
Established in 2010, Samhi Hotels follows a unique business model of acquiring underperforming hotels and revamping them using their proprietary Asset Management tool rules. By partnering with top hotel brands like Hyatt, Marriott, and IHG, Samhi Hotels efficiently manages the day-to-day operations of the hotels, thereby ensuring high standards of service and customer satisfaction.
Opportunity in the Hotel Sector
With the current upcycle in the hotel industry, driven by increasing demand and limited supply, Samhi Hotels is well-positioned to capitalise on this growth trend. The company focuses on the business travel segment in gateway cities of India, catering to the specific needs of corporate travellers and ensuring a seamless experience for its guests.
Unique Business Model
Sami Hotels follows a unique business model of acquiring underperforming hotels and revamping them using their proprietary Asset Management tool rules. They then partner with top hotel brands like Hyatt, Marriott, and IHG to manage the day-to-day operations of the hotel. This strategy allows Sami to focus on business travel in gateway cities of India, where they have a wide portfolio of 31 hotels with around 4,800 rooms across 13 cities.
Opportunity in the Hotel Sector
The hotel industry is highly cyclical, with periods of high profitability and periods of lower growth. Currently, the industry is in an upcycle, driven by a surge in travel and tourism, resulting in high demand for hotel rooms. This has led to increased occupancy rates and higher room rates, translating to improved profitability for hotel companies like Sami.
Growth Plans and Valuation
Samhi Hotels has ambitious growth plans, including renovating existing rooms, acquiring new properties, and expanding its portfolio in key cities like Mumbai and Kolkata. The company aims to increase its room inventory to around 5,400 rooms by 2028, with a focus on enhancing customer experience and driving profitability. Looking ahead, Sami Hotels is focused on expanding its room inventory, with plans to renovate existing rooms and add new rooms through acquisitions. The company’s valuation, compared to its peers, is attractive, with a lower EV/2 and price to sales ratio. This, coupled with its growth prospects and strategic initiatives, makes Sami Hotels a promising investment opportunity in the hotel sector.
Financial Analysis
Despite being in loss at the moment, Samhi Hotels has seen a significant improvement in its operating margins and operating profits post-COVID. The main challenge for the company is its high interest costs and debt levels, which they aim to reduce through the proceeds from their IPO. Once the debt reduction is completed, Sami is expected to become profitable at the PAT level, leading to a significant improvement in its financial performance.
In the financial year 20-21, the company’s total assets reached 2488 crores rising from 2200 crores. The revenue in 20-23 has significantly increased to 761 crores. However, in 20-21 the company incurred a loss of 477 crores, followed by losses of 443 crores in the next year and 338 crores in 2023. The warning sign was raised when the loss exceeded 2400 crores which escalated to 2787 crores.
Comparison of Companies
Indian Hotel, Lemon Tree, and Lemon Tree are some of the profitable companies in the segment with returns on net worth ranging from 9.49% to 12.48%. On the contrary, there are companies that are making losses in the IPO segment. It is crucial to research and compare the financials before investing in any company.
Valuation Analysis
When compared to its peers in the hotel industry, Samhi Hotels is trading at an attractive valuation, with a lower EV/2 and price-to-sales ratio. Despite being in a loss at the moment, the company’s strong growth potential and strategic initiatives make it a promising investment opportunity for investors looking to capitalise on the upcycle in the hotel sector.
Key Risks
One of the key risks for Samhi Hotels and the hotel industry as a whole is the cyclical nature of the sector. As the supply of hotel rooms catches up with the demand, there may be a slowdown in revenue growth and profitability. It is essential for investors to monitor the revar growth and cyclicity of the hotel industry to make informed investment decisions. One of the key risks for Sami Hotels and the hotel sector in general is the cyclical nature of the industry. As supply catches up with demand, there could be a slowdown in revenue growth and profitability. Investors need to be mindful of these cyclical trends and monitor the industry dynamics closely.
Conclusion
In conclusion, Samhi Hotels presents a compelling investment opportunity in the booming hotel industry in India. With a unique business model, strong growth potential, and attractive valuation, the company is well-positioned to benefit from the current upcycle in the sector. Investors should consider the key risks and market dynamics before investing in Samhi Hotels, but the company’s strategic initiatives and experienced leadership make it a promising player in the Indian hotel market.
Disclaimer: The information is only for information purpose only. It is always recommended to consult with certified financial experts before making any investment decisions. Follow busymoneyfreak.com .