Buy Samhi Hotels Ltd For Target Rs. 308 By Elara Capital Ltd
On track to deliver strong growth
Samhi Hotels (SAMHI IN) reported a topline growth of 10.4% to INR 2.96bn, driven by 14% growth in upper-upscale and upscale segments. RevPAR rose 15.1% YoY to INR 5,088, supported by upper-upscale and midscale segments. EBITDA grew 29.8% to INR 1.16bn. Margins expanded by 557bps to 37.3%, led by ARR growth and lower ESOP expense and corporate G&A expense. SAMHI turned PAT positive in Q3FY25 from loss last year. SAMHI is a play on: 1) asset addition-led growth (to add 857 keys in FY25E29E), and 2) value addition-led growth as it enriches the portfolio mix towards upper upscale and upscale segments. These triggers, organic ARR growth of ~6% and occupancy increase of ~100-200bps per annum would drive a revenue CAGR of 12%, and EBITDA CAGR of 26% in FY24-27E. We maintain BUY with TP of INR 308, on 16x FY27E EV/EBITDA.
Focus shifting to reprising ACIC portfolio:
The ACIC portfolio transitioned from franchise model to management contracts in Q3FY25. ACIC portfolio’s RevPAR was flat due to letting go off low-priced business, but margins expanded 320bps YoY, driven by correcting the cost structure. The focus is now on reprising the asset and FY26 revenue growth is likely to be ARR-led. Margin expansion will also be led by repositioning of two of its hotels, one in Pune and another in Jaipur.
Leverage has peaked out: Net debt:
EBITDA improved YoY from 5.1x to 4.9x but deteriorated QoQ from 4.6x as a result of cash outflow towards Trinity Hotel and W. SAMHI is targeting net debt reduction by way of asset recycling and internal cash generation. The management claims to be making good progress on asset recycling. Its criteria for selling any asset are following: (a) minuscule EBITDA contribution, (b) asset should be located in non-priority markets and (c) asset should be from the mid-scale segment. SAMHI aims to reduce net debt to ~INR 1.75bn by FY27E without any external capital raise.
Good traction at newly rebranded Holiday Inn:
SAMHI opened renovated and rebranded Holiday Inn Express (Caspia Pro) in December ’24 with 133 rooms. The hotel is clocking good ARR as well as gaining market share within its micro market. The hotel used to operate at an ARR of INR 2,300 but has garnered ARR of INR 5,600 in January till date (not adjusted for seasonality). Caspia Delhi is also going for renovation and is likely to be repositioned as Fairfield by Marriott and drive RevPAR growth.
Maintain Buy; TP retained at INR 308:
SAMHI has built a reputation of turning around inorganic growth opportunities. Despite robust fundamentals, it is trading at compelling valuation due to the risk of impending supply of ~34mn shares (~16% of paid-up capital) from PE investors (lock-in period expires on 21 March 2025). We expect these exits to happen in the block trade window to arrest price erosion. Maintain Buy with a TP of INR 308 (unchanged), based on 16x (unchanged) FY27E EV/EBITDA
Please refer disclaimer at Report
SEBI Registration number is INH000000933
