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Q4FY26 Occ. Hit by Temporary Disruption; Growth Outlook Intact

Q4FY26 hospitality performance remained relatively muted due to a temporary demand disruption in Mumbai and broader impact from the West Asia conflict, which affected FTAs and occupancy across key micro-markets. Hospitality revenue grew 3% YoY to INR 4.7 Bn, while EBITDA increased 1% YoY to INR 2.2 Bn. However, the annuity business remained strong, with revenue and EBITDA growing 37% YoY and 42% YoY, respectively, in Q4FY26, supported by a healthy momentum in the office leasing segment. However, occupancy is expected to switch towards domestic demand driven by higher flight cost to international markets. Further, H2 will normalise growth and demand from a lower base of H1FY27E. The company added 129 keys in Mariott Bangalore in FY25; stabilisation of these will provide a runway for growth.

View and Valuation

We reduce our revenue guidance for FY27E by 4.3% due to the postponement of Taj Delhi Airport hotel to FY28E. We forecast higher occupancy for the leasing business in FY28E, improving EBITDA margin to 46.7%. We value the company at 18.0x EV/Adj. EBITDA on FY28E, arriving at a Target Price of INR 920 (maintained). Our DCF valuation of INR 920/share provides a sanity check. We, therefore, maintain a “BUY” rating, given an upside of 22.4%.

Key Risk to Our Valuation

Possibly prolonged conflict is projected to mute occupancy for FY27E. Execution delays could postpone revenue recognition.

Annuity Growth Offsets Soft Occupancy

* RevPAR grew 5.1% YoY to INR 9,226, driven by ARR growth of 13%, while occupancy dropped to 67.2% (versus 73% in FY25)

* Revenue (ex-Residential Income) increased by 18.3% to INR 20.3 Bn, (in line with CIE est.) led by 13.4% growth in hospitality business

* EBITDA ex-Residential project margin improved by 218 bps, growing by 24% YoY to INR 9.1 Bn, led by increase in Annuity occupancy and higher margin

* PAT came in at INR 6.4 Bn with net profit margin at 23.3%, buoyed by lower interest cost and tax credits

Pipeline Expansion, Athiva Scale-up and Annuity Growth Visibility

CHALET’s pipeline remains strong with ~1,655 keys across seven projects, including Taj Delhi Airport, Ritz-Carlton Hyderabad and multiple leisure assets under the Athiva brand. The company is also expanding its Annuity portfolio, with commercial leasable area expected to increase from ~2.4 msf to ~3.3 msf by FY27E, supported by Powai and Hyderabad developments and continued GCC leasing demand. Athiva currently has 147 operational keys with ~510 keys under development and planning, supporting CHALET’s increasing focus on premium leisure hospitality and greater operating control over select assets.

Valuation

We reduce our revenue guidance for FY27E by 4.3% due to the postponement of Taj Delhi Airport hotel to FY28E. We forecast higher occupancy for the leasing business in FY28E, improving EBITDA margin to 46.7%. We value the company at 18.0x EV/Adj. EBITDA on FY28E, arriving at a Target Price of INR 920 (maintained). Our DCF valuation of INR 920/share provides a sanity check. We, therefore, maintain a “BUY” rating, given an upside of 22.4%.

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