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Set for further gain from expansion projects

Chalet’s Q4 revenue/EBITDA/adj. EBITDA growth was healthy at 24%/20%/ 25% YoY. Revenue was in line, though there was miss on margin due to higher other expenses. We see Chalet charting an EBITDA CAGR of 31% over FY24- 26E and its net debt reducing further over FY25-FY26E as it initiates a slew of expansion projects, which would engender a 9% room-count CAGR over FY24- 26E. Demand is likely to outstrip supply for the next 2-3 years, leading to further improvement in ARR. Leasing of commercial assets provides partial hedge against cyclicality of the hospitality industry. We cut FY25E/26E EBITDA by 1.6%/4.2% on margin miss. We maintain our ADD recommendation on Chalet, with SOTP-based TP of Rs850/share vs. Rs900/share earlier (SOTPbased Mar-26E EV/EBITDA of 20.5x for hotels and of 16x for rental assets).

Q4FY24: Revenue in line with RevPAR up 7% YoY; one-off impacts margin

Revenue/EBITDA growth were healthy at +24/20% YoY. Hospitality segment revenue improved by 24% YoY, Retail and Commercial (rental biz.) portfolios reported revenue increase of 26% YoY (+18% QoQ). Though the revenue was in line with our estimate, margin came below expectation (45.7%; +56bps YoY; +123bps QoQ) due to one-time expenses of Rs81mn toward Dukes decapitalization and acquisition cost of Aravali Resort. Average room rates or ARR growth was 5% YoY, while same store ARR was Rs12,159, up 8% over Q4FY23. Though MMR ARR was up only 2% YoY due to focus on occupancy and market share for many hotels, the Hyderabad ARR was up 20% YoY and Bengaluru ARR was up 26% YoY.

Expansion projects to aid growth; rates and occupancies to grow further; ADD

Chalet has 870 rooms under development that are primed to spur its room count by 9% p.a. over FY24-26E. Moreover, Chalet is augmenting its commercial real-estate portfolio from the current size of 1.2mn sq ft to 3.2mn sq ft. Demand is expected to outstrip supply for the next 2-3 years, leading to further improvement in ARR from a high base. Moreover, Company remains positive on margin expansion. Chalet can continue to grow ARR and optimize occupancies, as Company believes that there is headroom for growth in ARR/occupancies, given the strong domestic demand and still subdued foreign business travel. Planned capex of Rs150bn over FY25-FY26E will be met from internal accruals. De-leveraging to continue with net debt/EBITDA declining to 1.7x by FY27E from 4.7x at the end of FY24. We expect Chalet to post revenue/EBITDA CAGR of 23%/31% over FY24-26E. Moreover, benefits related to Airoli and Delhi International Airport projects are expected only from FY27. We cut our FY25/FY26E EBITDA by 1.6%/4.2%, on margin miss. We maintain our ADD recommendation on Chalet, with SOTP-based TP of Rs850/share vs. Rs900/share earlier (SOTP-based Mar-26E EV/EBITDA of 20.5x for hotels and of 16x for rental assets).

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