Buy Apeejay Surrendra Park Hotels Ltd For Target 156 by Prabhudas Liladhar Capital Ltd
Execution timelines remain a key monitorable
We recently interacted with the management of PARHOTE IN to gain insights into their long-term growth strategy and outlook. PARKHOTE IN continues to demonstrate strong growth visibility supported by a dual-engine model of hotel & retail F&B (Flurys) expansion. It is on track to scale its portfolio from 2,677 keys (42 hotels) to 6,719 keys (87 hotels) by FY30E, driven by a calibrated mix of owned additions and faster rampup in managed assets, which is expected to drive incremental growth with limited capital intensity. On the other hand, we believe Flurys is well poised for geographical expansion with an aim to reach 130-140 outlets by FY27E and ~300 over the medium term as PARKHOTE IN is actively engaging with mall developers, airport owners and multiplex operators to secure strategic locations across high footfall areas. We expect sales/EBITDA CAGR of 17%/20% over FY26-28E. We retain ‘BUY’ with SoTP-based TP of INR156 valuing the hotel business at 11.5x FY28E EBITDA and Flurys at 1.5x FY28E sales (no change in target multiple).
• Flurys, a legacy patisserie, on the verge of rapid expansion:
PARKHOTE IN articulated Flurys as a strategic growth engine that extends beyond heritage into a scalable, highfrequency consumption platform, with the network already at 111 stores (51 kiosks, 45 cafés and 15 tea rooms). With new COO at helm and plans to expand the business via tie-ups with mall developers, airport owners and multiplex operators, we expect 30/45 new stores in FY27E/FY28E, resulting in topline CAGR of 39% over the next 2 years.
• Strong inventory addition on the cards:
PARKHOTE IN operates 42 hotels with 2,677 keys across 32 cities, with a balanced portfolio of 8 owned (1,115 keys), 27 managed (1,226 keys) and 7 leased (336 keys) assets, supported by a 4-brand architecture spanning luxury to upper mid-scale segments. Led by owned asset additions and expansion via the management contract route, the portfolio is expected to scale to 6,719 keys by FY30E. Owned inventory is expected to increase from 1,115 keys to 2,112 keys by FY30E with a clear focus on premium/luxury segments to drive ARR growth and margin expansion.
Further, development is increasingly anchored toward mixed-use formats to optimize capital efficiency, as demonstrated by the EM Bypass project (~600,000 sqft), where 33 residential units have already been sold generating ~INR210mn upfront with further INR3,000–3,500mn expected over the next 3 years. A similar model is being planned in Pune, where FSI expansion (700,000–900,000 sqft potential) enables flexible mixeduse development (hotel + residential/office), lowering the net investment per key.
Scaling via management fee model with zero balance sheet strain:
As of FY26, management fees contributed to 2% of total revenue (27 managed hotels with 1,226 keys), but the share is expected to increase as managed portfolio scales toward ~4,124 keys by FY30E. Critically, the segment delivers strong operating leverage with 50-55% flow-through margin currently, which is expected to expand to ~70% over time, driven by scale benefits and minimal incremental costs. As the pipeline remains heavily skewed toward managed/asset-light additions (particularly under Zone/Zone Connect), this stream is expected to grow into a meaningful, high-margin layer, structurally improving EBITDA margin, while complementing the more capital-intensive owned portfolio.
Other key highlights:
1) For PARKHOTE IN, the client-wise revenue mix is as follows: ~48% from corporates, ~35% from leisure and 8-11% from wedding & free individual traveler segment.
2) Upcoming upscale properties are expected to entail a cost of ~INR15mn per key and can generate RoCE of ~20%.
3) A significant portion of PARKHOTE IN’s portfolio is yet to be renovated, with ~28 keys renovated at THE PARK, New Delhi, last year.
4) PARKHOTE IN aims to keep net debt/EBITDA below ~1.5x, as against the current level of ~0.7x.
5) During Q1FY27, Lotus Palace, Chettinad, achieved ARR of ~INR11,600, while Ran Baas Palace, Patiala, achieved ARR of ~INR33,000.
6) Going forward, growth is expected to be driven by ARRs, with some contribution from occupancy improvement.
7) Currently, ~92% of PARKHOTE IN’s business is derived from the domestic market.
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