ITC Hotels Limited has delivered a resilient and broad-based performance in Q3FY26, reinforcing confidence in its medium-term growth trajectory. ICICI Securities, in its latest result update, has maintained a BUY rating on the stock with a 12-month target price of Rs 240, implying an upside of 33% from current levels. Strong domestic demand across weddings, corporate travel, and MICE events, combined with sustained RevPAR expansion and improving operating leverage, has translated into robust revenue growth and margin improvement. With a capital-efficient expansion strategy, rising contribution from international assets, and a structurally favorable demand environment, ITC Hotels is increasingly positioned as a high-quality play on India’s premium hospitality upcycle.

Q3FY26 Snapshot: Operating Momentum Strengthens Across Core Segments

ITC Hotels reported a strong operating quarter, marked by double-digit growth across key performance indicators. Consolidated revenues (excluding the residential business) rose 14% year-on-year to Rs 1,142.8 crore, while standalone domestic revenues increased 13% YoY to Rs 1,046.7 crore.

Domestic RevPAR climbed 12% YoY to Rs 11,200 per night, driven by a sharp 290 basis-point improvement in occupancy to 75% and high-single-digit growth in average daily rates. The combination of volume recovery and pricing power underscores the brand’s premium positioning and its ability to outperform industry benchmarks.

Adjusted PAT (ex-residential) surged 29% YoY to Rs 280 crore, aided by operating leverage and higher other income, despite one-off cost pressures during the quarter.

RevPAR-Led Growth Continues to Anchor the Investment Case

Room economics remain the primary earnings engine for ITC Hotels. During Q3FY26, standalone room revenues rose 13% YoY to Rs 544 crore, while food and beverage revenues grew 8% YoY to Rs 411 crore, supported by strong MICE activity, corporate demand, and a buoyant wedding season.

The company continues to command a RevPAR premium of nearly 48% over the industry, reflecting superior asset quality and brand strength. ICICI Securities expects upcoming demand catalysts—most notably the ICC Cricket T20 World Cup in February 2026 across India and Sri Lanka—to support occupancies and ADRs into Q4FY26.

For FY26, overall revenues (ex-residential) are projected to grow ~13% YoY, with a 14% CAGR over FY25–FY28E driven by steady domestic RevPAR growth and incremental room additions.

Margin Expansion Gains Traction on Operating Leverage and Cost Discipline

Profitability metrics continue to trend favorably. Consolidated EBITDA margins (ex-residential) expanded 80 basis points YoY to 38.3% in Q3FY26, supported by scale benefits and disciplined cost management.

On a nine-month basis, EBITDA margins improved by 190 bps YoY to 33.2%, highlighting the operating leverage inherent in the business model. Higher contribution from F&B and MICE segments, along with improved performance at international properties, has further reinforced margin sustainability.

While the quarter absorbed a one-time exceptional charge of Rs 84 crore related to labor code changes and cyclone-related damages in Sri Lanka, the underlying margin trajectory remains intact.

ITC Ratnadipa Sri Lanka Emerges as a Strategic Earnings Lever

The international portfolio is transitioning from drag to driver. ITC Ratnadipa in Sri Lanka delivered 1.4x YoY growth in RevPAR and turned EBITDA-positive on a year-to-date basis, benefiting from improving macro conditions and a surge in foreign tourist arrivals.

The property has emerged as the RevPAR leader in Colombo, underscoring its strategic importance within ITC Hotels’ broader international expansion. As occupancies scale further, ICICI Securities expects Ratnadipa to contribute meaningfully to consolidated margins over the medium term.

Asset-Light Expansion Strategy Enhances Capital Efficiency

Room expansion remains focused on returns rather than balance-sheet intensity. As of Q3FY26, ITC Hotels operates 152 hotels with 14,070 rooms, while 61 hotels with 6,152 rooms are in the pipeline. Notably, ~5,500 keys in the pipeline are under a managed-hotel model, reinforcing the asset-light approach.

The company is also investing selectively in owned assets, including greenfield projects in Puri (118 keys) and Visakhapatnam (200 keys), alongside expansion at Bhubaneswar. The planned premium hotel at Yashobhoomi, New Delhi, expected to be operational by 2030, positions the brand to capture high-yield MICE demand near a major convention hub.

Financial Outlook and Valuation Framework

ICICI Securities has marginally trimmed earnings estimates to factor in conservative assumptions. However, the long-term growth narrative remains compelling.

Using a SoTP-based valuation, ICICI Securities values the core hotel business at 24x FY28E EBITDA, with additional value attributed to residential assets and net cash, arriving at a target price of Rs 240 per share.

Investment View: BUY on Structural Hospitality Upswing

ITC Hotels stands at the intersection of cyclical recovery and structural growth. A strong domestic travel backdrop, sustained pricing power, improving international performance, and disciplined capital deployment collectively strengthen earnings visibility.

Despite near-term earnings normalization following exceptional items, the medium-term outlook remains favorable. ICICI Securities expects steady momentum to persist, supported by industry tailwinds and brand-led execution.

Recommendation: BUY
Current Price: Rs 180
Target Price: Rs 240
Upside Potential: 33%