Chalet Hotels Sees Target Price Revision to Rs 994 by Prabhudas Lilladher
Chalet Hotels Sees Improved Operating Performance, Strong Pipeline Ahead
In a recent research report, Prabhudas Lilladher's analysts have found that Chalet Hotels' operating performance, excluding its residential business, has outpaced their estimates. The company's EBITDA margin stood at 48.7%, surpassing the predicted 45.0%, thanks to robust traction in leasing income.
However, the hospitality business faced a decline in revenue per available room (RevPAR) of 3.3% year-over-year (YoY) to INR10,544, primarily due to a dip in occupancy of 770 basis points (bps) YoY to 68.2%. This decrease was attributed to ongoing challenges such as the conflict in West Asia, construction work at Powai, and renovation at Four Points Sheraton in Vashi.
Despite these transitory issues, the research report predicts a stabilization in RevPAR, with a compound annual growth rate (CAGR) of 11.2% over the period of FY26-FY28E. Additionally, the partial operationalization of the Taj hotel in Delhi by 4QFY27E is expected to drive a 17.0% revenue CAGR in the hospitality business over the next two years.
Read also: Expert Portfolio Manager Raja Venkatraman Names Top Investment Picks for June 4
The company's long-term pipeline appears strong, with the acquisition of a hotel in Udaipur featuring 144 keys and a greenfield expansion in Hyderabad consisting of 330 keys. Furthermore, the annuity business is expected to witness the addition of 0.9 million square feet of leasing area by 4QFY27E.
Given the project pipeline, Prabhudas Lilladher's analysts predict a sales/EBITDA CAGR of 18%/21% over FY26-FY28E.
Estimates and Recommendation
The research report broadly retains the estimates and maintains a BUY recommendation with a target price (TP) of INR994. Chalet Hotels' hotel business is valued at 18x FY28E EBITDA, while the annuity portfolio is valued at a cap rate of 8.5% and the residential project at a net asset value (NAV) of INR17 per share.
| Company | FY26E | FY27E | FY28E |
|---|---|---|---|
| Chalet Hotels | |||
| Hotel Business | 18x FY28E EBITDA | ||
| Annuity Portfolio | 8.5% cap rate | ||
| Residential Project | INR17 NAV per share |
Investor Takeaway
Chalet Hotels' operating performance is expected to improve with strong traction in leasing income and stabilization of transitory issues.
More in Market
Expert Portfolio Manager Raja Venkatraman Names Top Investment Picks for June 4
MarketSmith India's 4 June Stock Recommendations
Foreign Investors Outpace Domestic Mutual Funds in Rupee Returns Despite Record Withdrawal of $27 Billion
