Buy The Leela Palaces Ltd For Target Rs.720 by Choice Institutional Equities
Pricing Strength Drives Robust Q2FY27 Performance
THELEELA delivered a strong operational performance in Q2FY27, with RevPAR growing 30% YoY to INR 17,225, primarily driven by a 30% increase in ARR to INR 25,046. The BRICS Summit in Delhi and a shift towards premium room categories supported pricing, with suite occupancy rising by over 700 bps YoY. City hotels remained the key growth driver, with H1FY27 RevPAR increasing 26% YoY to INR 15,948 and occupancy improving to 74%. Resorts reported 18% RevPAR growth to INR 14,722, although Coorg’s ramp-up continued to weigh on occupancy; ex-Coorg occupancy was close to 60%. We remain positive on H2FY27, supported by the upcoming festive, wedding season and continued strength in luxury demand
View and Valuation
We raise our RevPAR and ARR estimate owing to
a) Strong outperformance in a seasonally weak quarter
b) Robust premiumisation momentum
c) Event-led demand. We now expect FY28E EBITDA margin to come in higher than FY27E by ~103 bps, leading to an estimate revision of 17.5% for FY28E EBITDA. Further, H2FY27E is expected to be stronger and we remain positive on THELEEELA’s prospects. We believe THELEELA merits a higher multiple of 22.0x FY28E EV/Adj. EBITDA (vs. 18.0x earlier) owing to strong ARR outperformance and brand value. We, therefore, rate the stock a ‘BUY’ and raise our TP to INR 720/share (vs. INR 540). Our DCF-derived valuation of INR 700/share provides a sanity check.
Key Monitorable
As per the latest shareholding pattern of Jun’26: Creation of direct pledge of ~73.6% of promoter shareholding for “Payments or distributions to the investors of the Promoters, repayment of shareholder loans of the Promoters…”
Revenue Beats Estimate by 11%; EBITDA Grows 36% YoY
* RevPAR stood at INR 17,255, a ~30% increase YoY, entirely driven by ARR growth of 30%, while occupancy remained flat YoY at 69.0%
* Revenue came in at INR 4.1 Bn for Q2FY27, an improvement of 32.6% YoY (beating CIE estimate by 11%)
* EBIDTA stood at INR 1.8 Bn, increase of 36.1% YoY. EBITDA margin improved by 119 bps to 45.6% (versus CIE estimate of 46.3%)
* PAT came in at INR 946 Mn with PAT margin for Q2FY27 standing at 23.0% versus CIE estimate of 22.0%
Pipeline Expansion Sustains Long-term Growth Visibility
THELEELA has 1,038 keys under development across 10 properties, with openings planned through CY30E. Jaisalmer and the 63-key Waterstones property in Mumbai are targeted to open in FY27E, while civil work is progressing at Srinagar and Bandhavgarh. The 100-key Ayodhya project has reached the shell-and-core stage; the company has proposed to invest up to INR 1,850 Mn through CCPS to fund the project’s development and working capital requirement. At Agra, piling work has been completed, while design and site preparation are underway for the 30-key Tadoba resort and the 250-key BKC Mumbai hotel.
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SEBI Registration no.: INZ 000160131
