Buy Samhi Hotels Ltd For Target Rs. 240 by Choice Institutional Equities Ltd
Domestic Demand Cushions West Asia-caused Disruption
SAMHI's Q1FY27 performance was driven by an increase of domestic travellers from 78% to 81% of total room nights sold, offsetting West Asia-linked disruption to international arrivals; however, ARRs saw a subdued growth. RevPAR grew ~10.0% YoY to INR 5,219, supported by near full occupancy in 36% of days, resulting in an overall occupancy of ~79.3%. Approval delays at Hyatt Regency Pune and continuing geopolitical tension pose near-term headwinds, while steady office leasing in Bengaluru, Hyderabad and Pune markets (>65% of net absorption) offers a more supportive corporate travel demand outlook.
View and Valuation
We revise our estimate upwards by 1.4% / 2.2% for FY27E / FY28E EBITDA, respectively. This is supported by continued mix improvement, offsetting GST impact on sub-INR 7,500 rooms. We believe SAMHI’s strong corporate-led occupancy engine and the asymmetric payoff in the leisure segment (Rare Enterprise acquisition) will support earnings expansion. Asset stabilisation, mix shift towards Upper-Upscale and Upscale and a strong balance sheet reenforce our conviction in SAMHI’s growth prospect. We apply a target EV/EBITDA multiple of 11.0x (a significant discount to peers) on FY28E Adj. EBITDA to arrive at a target price of INR 240 (vs. INR 200). Our DCF valuation of INR 240 provides a sanity check. Given an upside of ~32%, we retain our ‘BUY’ rating on the stock.
Upscale Pipeline and Deleveraging Anchor Long-term Growth
SAMHI continues its capital-efficient, upscale-led expansion, targeting upscale income share of ~60% by FY30E (from 41%), backed by a healthy pipeline including the near-term W-Hyderabad launch (170 keys). The balance sheet strengthened further, with Net Debt/EBITDA at 3.2x (2.4x adjusted) and interest cost down to 7.8%, supporting a steady free cash flow generation. In addition, the board-approved fundraise of up to INR 7,500 Mn facilitates growth flexibility. Long-term visibility is reinforced by the RARE India leisure platform (75 hotels, 1,046 rooms) integrating into the Marriott Outdoor Collection, alongside the INR 120-Mn Itmenaan Lodges acquisition in Uttarakhand deepening SAMHI's push into high-yield, experiential leisure assets.
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