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Chalet Hotels (Chalet) 1Q revenue was 2% below JMFe, while lower than expected margins led to a 4% miss on EBITDA. The hospitality business, with revenue of INR 3.3bn (up 15% YoY), held its ground in a quarter where business was impacted by the General Elections, extreme heat wave conditions across the country and subdued MICE activity. The annuity business reported steady performance with revenue of INR 0.36bn (+25% YoY; flat QoQ) in the quarter. The company has entered into an MOU to acquire a c.11 acre land parcel in South Goa for INR 1.4bn, which will house a 5-star beachfront, 175-key property. This acquisition is expected to be completed by Aug’24 and the construction of the hotel is expected to start post-monsoon season, with the aim to complete the development in 36 months. We value Chalet on a SoTP basis with a Mar’25 TP of INR 980. Maintain BUY.

* Same–store RevPAR growth of 4% in 1QFY25: Revenue from operations came in slightly lower than expected at INR 3.6bn (+16% YoY; down 14% QoQ; JMFe: 3.7bn) aided by a room count increase by 9% YoY and same-store RevPAR growth of 4%. EBITDA of INR 1.4bn (39% margin; +28% YoY; down 23% QoQ) was lower than our estimates. 1QFY25 portfolio-wide ARR and occupancy were flat on a YoY basis at INR 10,446 (+1% YoY; down 12% QoQ), and 71% (+50bps YoY; down 550bps QoQ) respectively; as a result, RevPAR grew to INR 7,361 (+2% YoY; down 18% QoQ). In 1QFY25, hospitality revenue grew 15% YoY to INR 3.3bn and hospitality EBITDA came in at INR 1.3bn (+12% YoY), as the margins were maintained at 41%.

* MMR remains the top market for Chalet: In the hospitality segment, 59% of the total revenue was contributed by the Mumbai Metropolitan Region (MMR) which clocked an occupancy of 78% (+400bps YoY; down 300bps QoQ) and ARR of INR 10,530 (down 3% YoY). The company recorded accretive RevPAR performance in Mumbai at the Sahar and Powai hotels, while the Vashi property saw a 7% dip in RevPAR, as growth is subdued due to a significant increase of supply in the micro-market over the last 2 years. In Hyderabad, Westin Mindspace reported a 13% YoY growth in RevPAR, while Westin Hi-tech City saw a 15% RevPAR growth, operating on full (100%) occupancy

* Other updates: The management expects leased occupancy of 90% at its annuity assets across Powai and Bengaluru, where a few transactions are in the final stages of closure. This portfolio is expected to generate steady-state rental income of INR 2.8bn. Chalet is planning a capex outlay of c. INR 15bn over the next few years, including INR 6.5bn for the office development in Powai and INR 6.0bn for the hotels: DIAL, brownfield expansion at Dukes and JW Marriott, Bengaluru. In Raheja Vivarea (Bengaluru residential project), Chalet sold total of 17 new units (0.04msf) at an average rate of INR 21,548 /sqft, which is a 14% increase compared to the average rates in FY24.

* Maintain BUY with TP of INR 980: We have included the impact of the Goa acquisition in our numbers and arrive at a SoTP-based Mar’25 TP of INR 980 ascribing an EV/Mar’26 EBITDA of 24.0x and cap rate of 7.5% for the hospitality and annuity assets respectively

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