Buy Samhi Hotels Ltd For Target Rs. 313 - Prabhudas Liladhar Capital Ltd
Improved BS health to drive re-rating
Quick Pointers:
* Same store RevPAR increases 20.6% YoY to Rs5,958 in 4QFY25.
* Net debt declined to Rs14,289mn post fund infusion by GIC.
We increase our PAT estimates after accounting for minority interest by 20.6%/12.7% for FY26E/FY27E as we re-align our debt & interest forecast post fund infusion by GIC into a newly created JV platform for upscale hotel assets. SAMHI reported an in-line operating performance with EBITDA margin of 38.1% (PLe 36.9%) while PAT was impacted by an exceptional charge of Rs194mn; offset by a tax write back of Rs233mn. We expect top-line CAGR of 12.9% over the next 2 years led by addition of 245 keys with an EBITDA margin of 38.0%/39.1% in FY26E/FY27E. After fund infusion by GIC (Rs5,800mn received as of 27th May), net debt has fallen to Rs14,289mn. Consequently, we expect interest cost to fall from Rs2,288mn in FY25 to Rs1,500mn in FY27E resulting in 75.4% PAT CAGR over the next 2 years (after accounting for minority interest). Samhi trades at attractive valuation of 11x/9x our FY26E/FY27E EBITDA estimates and we expect re-rating to follow amid improvement in BS health and strong PAT growth. Retain BUY on the stock with a TP of Rs313 (14x FY27E EBITDA; no change in target multiple).
RevPAR increases 17.7% YoY: Topline increased 14.2% YoY to Rs3,188mn (PLe Rs3,362mn). ARR increased 19.2% YoY to Rs7,487. RevPAR grew 17.7% YoY to Rs5,615 while occupancy stood at 75.0%.
EBITDA margin stood at 38.1%: EBITDA increased 42.2% YoY to Rs1,215mn (PLe Rs1,241mn) with a margin of 38.1% (PLe 36.9%). PAT rose 306.1% YoY to Rs459mn (PLe Rs406mn) with a margin of 14.4% (PLe 12.1%). PAT includes exceptional charge of Rs194mn pertaining to loss on sale of investments and reversal of impairment provision on certain properties. Additionally, there was a tax writeback of Rs233mn. Adjusting for these items, PAT was up 447.2% YoY to Rs420mn.
Con-call highlights: 1) Westin & Tribute hotels in Bangalore can generate incremental revenue of ~Rs1.8bn-2.0bn (assuming revenue per key of Rs5-5.5mn). 2) The upcoming hotel in Hitec City, Hyderabad is set to be operational in 2HFY27, with an expected incremental revenue of ~Rs1bn (assuming revenue per key of ~Rs6mn). 3) Early double-digit revenue growth is expected in FY26E. 4) Out of ~Rs7.5bn of capital commitment from GIC, ~Rs5.8bn has been received. The partnership has strengthened the balance sheet, reducing net debt/EBITDA to 3.5x on TTM basis. 5) ESOP cost was Rs180mn in FY25 and is expected to decline to Rs100mn in FY26. 6) Interest cost stood at ~Rs2.3bn in FY25, including Rs300mn of non-cash expenses like amortization of processing fees and lease interest. 7) F&B revenue was up 6.6% YoY in 4QFY25. To enhance F&B’s contribution to the topline, 2 ballrooms are being renovated and are expected to be operational in 2HFY26E. 8) Impairment reversals of ~Rs1,380mn are yet to recognized (including Rs760mn pertaining to the Navi Mumbai property). 9) Bangalore witnessed samestore RevPAR growth of 40%/23% YoY in 4QFY25/FY25. 10) Capex for FY26E is pegged at ~Rs1.8–2.0bn, with Rs500mn to be contributed by GIC and the remainder will be funded through internal accruals. 11) Conversion of Four points by Sheraton to Courtyard by Marriott at Pune and Jaipur will lead to revenue growth of ~20-25% and ~30% respectively. 12) ACIC’s portfolio reported flat revenue of ~Rs1.9bn in FY24 and FY25, while EBITDA improved from Rs668mn in FY24 to Rs742mn in FY25.
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