Accumulate Chalet Hotels Ltd For Target Rs. 825 - Elara Capital
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Business destinations raking in the moolah
Demand drivers intact
Chalet Hotels (CHALET IN) reported the best Q3, led by higher profitability with 538bp margin expansion in the hospitality segment. Topline grew 29% to INR 3.7bn, led by 29% growth in the hospital business and 24% growth in the commercial annuity business. Demand continues to be robust across India, especially in the micro markets of CHALET, led by growth in domestic business travel. EBITDA grew 46% YoY to INR 1.7bn, led by 47% growth in the hospital business and 27% growth in the commercial annuity business. EBITDA margin expansion of 525bp to 44.4% was driven by the hospitality business. APAT grew 69% to INR 706mn.
Business travel and MICE driving growth
JW Mariott at Sahar and Westin at Powai in Mumbai along with Mariott at Bengaluru and Westin Mindspace at Hyderabad have reported the highest-ever revenue in Q3FY24. Meetings Incentives Conferences and Events (MICE), large banquet events, weddings, and social events have seen a healthy demand pickup and drove 27% growth in F&B. The Westin Powai property saw huge MICE demand, which led to a 11pp YoY increase in the Mumbai Metropolitan region (MMR) portfolio occupancy. Despite healthy occupancy levels, average revenue per room (ARR) growth was at a mere 4% as CHALET has focused on raising occupancy levels at Westin Powai vs lower occupancy of the past year. ARR growth in MMR ex-Westin Powai is in the double digits.
Valuation: reiterate Accumulate with a higher TP of INR 825
Robust demand coupled with CHALET’s tie-up with global hospitality brands and presence in key metro cities ensure continued high occupancy and healthy ARR. Its strong promoter pedigree – the Raheja Group – offers it operational expertise and financial flexibility. Demand stickiness and smooth price passthrough are leading to better-than-anticipated earnings growth; hence, we raise our EBITDA by 5% and PAT by 6% for FY25E. We introduce FY26 estimates. We reiterate Accumulate with a higher SOTP-based TP of INR 825 from INR 662. We value the hotel business at 20x (unchanged) FY26E EV/EBITDA and the commercial real estate at 11x (from 10x) FY26E EV/EBITDA and the residential real estate at NAV.
Please refer disclaimer at Report
SEBI Registration number is INH000000933
