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Healthy Hospitality Performance and Strong Annuity Growth

CHALET delivered a healthy Q2FY27, with hospitality revenue growing by 8.5% to INR 4.1 Bn, driven by 11.3% ARR growth to INR 13,546 and 7.2% RevPAR growth to INR 8,702, despite a 250-bps decline in occupancy to 64.2%. While business travel demand remained mixed amid reduced air connectivity and higher airfare, the leisure portfolio remained resilient, delivering 33.7% RevPAR growth, driven by improvement in both, ARR and occupancy. The rental annuity business continued to provide stable earnings support, with revenue and EBITDA rising 22% and 23.6% YoY, respectively, supported by 91% occupancy and an increase in monthly rental revenue run-rate to INR 300 Mn in September 2026. Consolidated PAT grew 39.7% YoY to INR 2.2 Bn, aided by a one-time deferred tax credit of INR 1.1 Bn following the adoption of the concessional tax regime.

Rate-led RevPAR Growth Drives Revenue up 11% YoY

* RevPAR for the quarter grew 7.2% YoY to INR 8,702, driven by ARR growth of 11.3%, while occupancy dropped to 64.2% (versus 66.7% in Q2FY26)

* Net revenue (ex-residential) increased by 10.7% to INR 5,015 Mn led by 8.5% growth in hospitality business. Overall net revenue came in at INR 5,020 Mn (in-line with CIE estimate of INR 5,016 Mn)

* EBITDA stood at INR 2,175 Mn (vs. CIE estimate of INR 2,303 Mn), while margin (ex-residential) grew by 171 bps YoY. Overall margin stood at 43.3% (up 264 bps YoY; missing CIE estimate by 257 bps)

* Adj. PAT came in at INR 1,038 Mn (-33.0% YoY), in-line with CIE estimate of INR 1,016 Mn

Hospitality Pipeline Strengthens Long-term Growth Prospects

CHALET’s hospitality pipeline stands at 2,036 keys, including 906 Athiva keys, with CIGNUS II targeted for completion by FY27-end and Taj Delhi expected to open in early FY28E. While Ritz-Carlton Hyderabad is progressing as planned, Hyatt Regency Airoli has been pushed to FY30E. The company has added two Athiva projects in Hyderabad (150 keys) and Pune (231 keys), taking the brand’s pipeline beyond 1,200 keys. Athiva Pulse, Navi Mumbai, has been rebranded under the Autograph Collection, while Khandala continues to ramp up. The expanding Athiva platform provides an optionality for third-party management opportunity

View and Valuation

We carry forward our previous estimate with marginal changes and factor in a revenue / EBITDA / PAT CAGR of 7.7% / 11.8% / 10.6%, respectively. With CHALET’s expanding hotel portfolio and stable annuity income stream, we anticipate earnings growth, projecting ROE to rise to 15.8% (ex-residential) in FY29E. We, therefore, apply an EV/EBITDA multiple of 18.0x (maintained) to the hospitality business and 14.0x (maintained) to the annuity business, arriving at a target price of INR 920 (retained), thus assigning an 'ADD' rating.

Key Risks:

Probable delay in pipeline keys, possible delayed stabilisation of new assets under Athiva brand, travel disruption due to geopolitical conflict and increased competition in key markets such as Mumbai.

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