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Excluding residential business, CHALET IN’s operating performance was better than our estimates with EBITDA margin of 46.5% (PLe 42.7%) aided by better cost control and strong traction in leasing income. Occupancy dipped 120bps YoY to 64.8% amid flat international demand, ongoing construction work at Powai and renovation at Four Points Sheraton, Navi Mumbai. Nonetheless, as noisy work at Powai is nearing completion and renovation at Vashi is complete, we expect occupancy levels to improve translating into RevPAR CAGR of 11.4% over FY26-FY28E. Further, partial operationalization of Taj, Delhi by 4QFY27E is likely to drive 16.8% revenue CAGR in hospitality business over the next 2 years. Annuity business is also likely to witness addition of 0.9mn sq ft of leasing area by 4QFY27E. Given addition of two marquee assets (Taj, Delhi and Tower-2, Powai), we expect sales/EBITDA CAGR of 18%/21% over FY26-FY28E. We broadly retain our estimates and maintain BUY with a TP of INR991 as we value the hotel business at 18x FY28E EBITDA (no change in target multiple), annuity portfolio at a cap rate of 8.5% and the residential project at NAV of INR17 per share. 

RevPAR increases 6.5% YoY: Revenue decreased by 42.7% YoY to INR5,123mn. Excluding residential business, revenue increased by 10.3% YoY to INR5,140mn (PLe INR5,068mn). Hospitality revenue was up 8.5% YoY to INR4,185mn (PLe INR4,228mn) while annuity revenue was up 18.2% YoY to INR865mn (PLe INR840mn). ARR increased 8.5% YoY to INR13,247. RevPAR increased 6.5% YoY to INR8,582 while occupancy stood at 64.8%.

EBITDA margin (adjusted for residential business) stood at 46.5%: EBITDA decreased 34.5% YoY to INR2,340mn. However, EBITDA (adjusted for residential business) increased 23.3% YoY to INR2,390mn (PLe INR2,164mn) with a margin of 46.5% (PLe 42.7%). Beat at EBITDA level was driven by lower-than-expected other expenses at INR1,608mn (PLe INR1,698mn). Hospitality/annuity EBITDA stood at INR1,784mn/INR735mn with a margin of 42.6%/85.0% respectively. PBT (before exceptional items) decreased 47.0% YoY to INR1,424mn. However, PBT (adjusted for residential business before exceptional items) rose 40.2% YoY to INR1,474mn (PLe INR1,186mn) with a margin of 28.7% as compared to a margin of 22.6% in 1QFY26. Exceptional expense of INR99mn was recognized during the quarter towards compensation paid under a Voluntary Separation Scheme (VSS) implemented at one of CHALET IN's hotel units.

Con-call highlights:

1) Foreign Tourist Arrivals (FTAs) were expected to normalize in ~60 days had geopolitical tensions eased, although renewed conflicts in West Asia continue to weigh on recovery. 2) Hyderabad and Bengaluru witnessed occupancy pressure due to weaker FTAs, lower group bookings and softer relocation demand, although ADRs remained resilient across markets. 3) Monthly commercial rental run-rate reached INR290mn in Jun'26 and is expected to increase to INR300-320mn during FY27E, with CIGNUS 2 driving the next leg of growth from FY28E onwards. 4) 70 rooms are targeted to be launched at Taj, Delhi by 4QFY27E, with the remaining inventory expected to be launched subsequently in FY28E. 5) 168 units of Phase-2 Koramangala are expected to be handed over during FY27E. 6) Net debt stood at INR20,405mn as of Jun’26, increasing marginally following recent acquisitions. Of this, INR10,914mn is allocated towards under-construction assets primarily CIGNUS 2 Powai and Taj, Delhi. 7) Capex of INR30bn has been planned over FY27E–FY29E, and majority of it is expected to be funded through internal accruals. 8) Leisure portfolio is expected to contribute at least 20% to the revenue in long term. 9) CHALET IN intends to launch the Udaipur property only after completing the entire refurbishment and expansion, aiming to position it as a premium ATHIVA resort with enhanced banquet, villa and F&B offerings. 10) South Goa property remains delayed due to regulatory approvals, although designs and contractor appointments are complete, with construction expected to commence after the monsoon. 11) MMR contributed ~43% of hospitality revenue during 1QFY27.

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