Buy Chalet Hotels Ltd for the Target Rs 1,055 by Prabhudas Liladhar Ltd
Inventory addition to drive growth in FY28E
Excluding residential business, CHALET IN’s operating performance was broadly in-line with EBITDA margin of 44.3% (PLe 44.4%) aided by better cost control and strong traction in leasing income. RevPAR growth was modest at 7.2% given occupancy dipped 240bps YoY to 64.2% as MMR region proved to be a drag. CHALET IN has been facing occupancy-led challenges in MMR region since the last 2 quarters amid flat international demand, ongoing construction work at Powai and renovation/rebranding at Four Points Sheraton (FPS), Navi Mumbai. Despite these challenges, ARR in MMR region was up 8%/13% in 1Q/2Q indicating recovery in the RevPAR growth could be swift once occupancy bounces. As noisy work at Powai is largely over and FPS has been rebranded as ATHIVA, we expect occupancy levels to improve in 2HFY27E. Aided by recovery in MMR region and addition of two marquee assets (Taj, Delhi and Tower-2, Powai) by next year, we expect sales/EBITDA CAGR of 17%/19% over FY26-FY29E. We maintain BUY with a TP of INR1,055 as we value the hotel business at 18x Sep-28E 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 7.2% YoY:
Revenue decreased by 31.7% YoY to INR5,020mn. Excluding residential business, revenue increased by 10.9% YoY to INR5,110mn (PLe INR4,972mn). Hospitality revenue was up 8.2% YoY to INR4,115mn (PLe INR4,072mn) while annuity revenue was up 22.0% YoY to INR901mn (PLe INR900mn). ARR increased 11.3% YoY to INR13,546. RevPAR increased 7.2% YoY to INR8,702 while occupancy stood at 64.2%.
EBITDA margin (adjusted for residential business) stood at 44.3%:
EBITDA decreased 27.3% YoY to INR2,175mn. However, EBITDA (adjusted for residential business) increased 19.9% YoY to INR2,265mn (PLe INR2,208mn) with a margin of 44.3% (PLe 44.4%). Hospitality/annuity EBITDA stood at INR1,691mn/INR750mn with a margin of 41.1%/83.3% respectively. PBT (before exceptional items) decreased 39.4% YoY to INR1,241mn. However, PBT (adjusted for residential business & before exceptional items) rose 40.6% YoY to INR1,331mn (PLe INR1,278mn, CE INR1,272mn) with a margin of 26.0% as compared to a margin of 20.5% in 2QFY26. Due to remeasurement of DTL liabilities amounting to INR1,176mn, we have provided a comparison at PBT level (PAT comparison is likely to give a skewed result).
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SEBI Registration number is INH000000933
