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We assume coverage on Chalet Hotels with an ADD recommendation and upside of 2%. Chalet Hotels delivered a steady performance in Q1FY25. Hospitality revenue growth of 15.3% YoY was aided by RevPAR growth, inventory addition, and F&B contribution. ARR/RevPAR growth moderated from previous quarters, as the extended general elections, heatwave, and weaker quarter for MICE were temporary headwinds. As per the management, growth in July bounced back sharply, with better occupancies and rates. Going ahead as well, the mgmt. is confident of double-digit growth, given supportive tailwinds enduring. Also, Chalet has announced acquisition of a land parcel in Goa for a sum of Rs1.37bn, though it will take a few years to become operational. We cut our FY25/26 EBTIDA estimates by 4%/3%, factoring in the Q1 performance, and introduce FY27 estimates. We maintain ADD on Chalet with SOTP-based TP of Rs850/sh (SOTP-based Jun-26E EV/EBITDA of 20.5x for Hotels; 16x for rental assets).

Results Summary

Consolidated Revenue/EBITDA grew 16.2% /27.7% YoY in Q1FY25. Hotel revenue grew 15.3% YoY to Rs3.26bn, with room revenue up 14.7% and F&B revenue up 20.1% YoY. Commercial revenue grew 24.6% YoY. ADR grew 1% YoY to Rs10,446 (MMR decline of 3% YoY and non-MMR growth of 8% YoY). Occupancies grew by 85bps YoY to 70.5%. Occupancies declined in non-MMR due to recent capacity addition in Novotel, Pune. Overall RevPAR grew 2% YoY to Rs7,361 (MMR growth of 3% and non-MMR growth of 6%). Same-store occupancy/RevPAR grew by 191bps/4% YoY. EBTIDA margin expanded by 352bps YoY to 38.8%. Net debt declined to Rs15.3bn at the end of Jun-24 compared with Rs25.1bn at the end of Q4FY24, as the company utilized QIP proceeds. Cost of finance declined by 44bps QoQ to 8.43%

Earnings Call KTAs

1) Purchase of land in Goa: The company has purchased an 11-acre land parcel in South Goa for a sum of Rs1.37bn. Approvals for the plot are already done, hence construction work can start faster. Beachfront properties will attract premium pricing. 2) MMR: Vashi hotel saw a 7% YoY decline in RevPAR due to significant increase in room supply in hotels in Navi Mumbai. Due to major renovation work, the company removed limited inventory of Dukes Retreat from mid-May. 37 new rooms and some public areas will be opened for this facility before 15-Aug. 3) Non MMR: Bengaluru saw the strongest growth in Q1, followed by Hyderabad. Blended occupancy for Hyderabad is higher on YoY basis due to 100% occupancy in the second hotel. Occupancy is lower in Pune due to capacity addition. 4) Residential: Chalet sold 17 new units during the quarter, with the total number of units sold since the launch of the project now at 138. The residential project at Koramangala, Bengaluru has surpassed management expectations. 5) Commercial: Leasable area stands at 2.4msf, of which 1.2msf has been leased so far. The management expects 90% of the office portfolio to be leased by the end of the year. EBITDA margin for the segment is slightly lower, as the company carries the cost of unoccupied inventory.

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