ITC Hotels (ITCHOTELS)

FairStock Score: 41/100 — MIXED

Score breakdown: P/E: 0/3 · ROCE: 0/2 · Growth: 2/2 · Dividend: 0/1

Key Financials

Strengths

• Very low leverage: Debt/Equity 0.01 and Altman Z-Score 3.28 indicate strong financial stability
• Piotroski F-Score 8/9 suggests solid fundamental earnings quality
• Strong momentum: sales growth 21.20% and profit growth 37.46%, with latest quarter net margin around 19.3%
• Promoter holding of 39.85% aligns management interests with shareholders

Concerns

• Valuation is demanding: P/E 44.82 and P/B 3.13 for an ROE of only 7.09%
• Negative free cash flow of ₹-1,403 Cr shows heavy capital expenditure, and dividend yield is zero
• Graham Number of ₹36.13 versus price ₹160.50 implies a huge negative margin of safety
• PEG of 5.31 suggests growth is already more than fully priced

AI Analysis

Let me start with the business. ITC Hotels is a branded hospitality player in a capital-intensive, cyclical industry. Financial health first: debt-to-equity is 0.01, Altman Z-Score is 3.28, and Piotroski F-Score is 8/9. The balance sheet is sound; distress is not the worry. Does it have a moat? A hotel brand may give some pricing power, but the economics do not yet prove a wide moat. Return on equity is only 7.09%, return on capital 9.63%. A truly strong franchise should earn far more on its tangible assets. Sales grew 21.2% and profit grew 37.5%, and the latest quarter had a net margin of about 19.3%. Those are encouraging numbers, but free cash flow is minus ₹1,403 Cr. This business consumes cash as it expands. With no dividend yield, shareholders are asked to trust future reinvestment. Promoter holding of 39.85% does align interests, but alignment is not a substitute for value. Now valuation. At ₹160.50, market cap is ₹36,671 Cr, or 44.82 times earnings and 3.13 times book. For a 7% ROE business, that is rich. The Graham Number is only ₹36.13, giving a negative margin of safety of roughly -387%. Even if I account for the hotel upcycle, a PEG of 5.31 tells me expectations are high. The 52-week range, ₹137.30 to ₹253.67, shows how volatile this sector is. I prefer buying with a margin of safety; this price has none. This is a cyclical company, not a failed one. But a good business can be a bad investment if you overpay. I need higher returns on equity, positive free cash flow, and a far lower entry price. None of those are present today. It goes into the too-hard pile until conditions change.

Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer