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Chalet has acquired ‘Courtyard’ by Marriott Aravali Resort, NCR, a 158-room resort, at an EV of Rs3.15bn, implying FY26E EV/revenue of 3.6x, EV/EBITDA of 9x, and EV/room of Rs20mn. Such valuations look reasonable, considering the multiples of ‘The Dukes Retreat’ acquisition. The Resort’s ARR & occupancy improvement could turn the acquisition value-accretive, as Chalet trades at 1YF EV/EBITDA of 24x (Bloomberg). However, its slow-paced occupancy improvement could be a key risk. The 'Courtyard’ acquisition gives Chalet an opportunity to enter the NCR market via an already operational resort. Our EBITDA increases ~3% each for FY25E/FY26E, as we factor-in the acquisition. Our SOTP-based TP rises to Rs900/sh (FY26E EV/EBITDA: 20.5x for hotels; 16x for rental assets) vs Rs825 earlier, as we roll forward to FY26E. We retain ADD.

Enters NCR with operational hotel, to capitalize on favorable demand-supply 

Chalet has entered the NCR market with the acquisition of ‘Courtyard’ by Marriott Aravali Resort, NCR. Opened in June 2022 and only around a 1&1/2-hour drive from Delhi NCR, the resort offers: i) 158 meticulously designed rooms; ii) ~14 acres of a lush, green urban retreat; iii) a ~20,000sqft event-space for leisure travelers, destination weddings, and MICE; iv) on-premise adventure park offerings for adventure enthusiasts, besides recreational facilities. Occupancy at 44% for 9MFY24 is the key concern, though we expect it to improve, as: 1) the resort commenced operations only in Jun-22; 2) NCR region has logged a slow-paced keys CAGR of 1-4% over 2017-23. The Marriott Aravali Resort acquisition will offer an opportunity for Chalet to capitalize on the favorable demand-supply dynamics in the NCR market, via an already operational resort, while its 390-room Taj Hotel at Delhi International Airport is expected to be launched only by FY26. Thus, the acquisition will help the company take advantage of the uptrend in the current hospitality cycle.

Acquisition to be value-accretive; rates and occupancies to grow further; ADD

Though Company’s 9MFY24 ARR stands at Rs13.5k and occupancy at 44%, we expect ARR to reach Rs15.4k and occupancy 65% by FY26E. Occupancy for luxury hotels is generally in the 65-70% range. We expect the resort’s revenue/EBITDA at Rs867mn/Rs352mn by FY26E, assuming occupancy of 65%, share of food & beverages (F&B) at 50% of room revenue, and EBITDA margin of ~40%. With EV of Rs3,150mn adjusted for net current assets including cash, this translates into FY26E EV/revenue/EV/EBITDA of 3.6x/9x, respectively. Valuations look reasonable, considering that Chalet Hotels currently trades at 1-year forward EV/EBITDA of 24x (per Bloomberg estimates). Also, Chalet Hotels acquired The Dukes Retreat at EV/revenue (FY22) of 6x on trailing basis. EV/room for Mariott Aravali Resort is ~Rs20mn, with 14 acres of land vs. ~Rs17mn for The Dukes Retreat with 7.5 acres of land. Our consol. revenue increases ~4% each and EBITDA increases ~3% each for FY25E/FY26E, as we adjust for the acquisition. Our SOTP-based TP increases to Rs900/share (EV/EBITDA of 20.5x for hotels and of 16x for rental assets) vs. Rs825/share earlier, as we roll forward our estimates by a quarter. We maintain ADD on the stock

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