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Demand environment remained mixed during Q1FY27E, with geopolitical tensions in West Asia continuing to weigh on travel sentiment, particularly inbound tourism and discretionary travel. Domestic aviation traffic remained subdued (3% growth in first 2 months of Q1FY27E), reflecting softer demand, while elevated ATF price and forex volatility will weigh on profitability of airlines. In contrast, the hospitality sector’s performance is expected to be better aided by a favorable wedding calendar (24 auspicious wedding days) and a low base (May’25 was impacted by Operation Sindoor and early onset of monsoon). Meanwhile, the luggage sector continued to face pressure from sharp inflation in key raw materials such as PP, PC, nylon and polyester following the spike in crude prices. We expect earnings in the aviation and luggage sectors to be impacted by cost inflation, while hospitality sector is likely to deliver resilient performance supported by healthy domestic demand. SAMHI IN and SII IN remain our top picks in the travel & tourism space.

Luggage - RM inflation to weigh on earnings:

We expect VIP IN/SII IN to report revenue of INR5.7bn (up 1.0% YoY)/INR5.9bn (up 12.0% YoY) in Q1FY27E, supported by 4-6% price hike taken in May’26, and a favorable wedding calendar, with 24 auspicious wedding days in Q1FY27E. RMs such as PP, PC, nylon and polyester witnessed sharp inflation amid ongoing geopolitical tensions in West Asia, exerting pressure on margins. Consequently, VIP IN is expected to report GM of 38.5%, while SII IN’s GM is expected to be at 43.7%

We expect VIP IN to report a loss of INR635mn in FY27E (earlier PAT of INR357mn) and cut our FY28E EPS estimates by 31% as we finetune our topline and margin assumptions. Given the business is undergoing a transformation and earnings volatility is likely to remain high due to rising competition and RM inflation, we change our valuation methodology to EV/sales and value the stock at 1.75x FY28E sales. We maintain ‘SELL’ on the stock with TP of INR245. For SII IN, we broadly maintain our estimates and maintain ‘BUY’ on the stock with TP of INR1,953 (40x FY28E EPS; no change in target multiple)

Hotels - Better demand environment leads to steady performance:

For CHALET IN, we expect ARR to increase 6.0% YoY to INR12,939, while occupancy is likely to remain largely stable at 66%. This reflects steady business performance supported by a favorable wedding calendar along with a low base. Overall, we expect CHALET IN to report revenue increase of 8.8% YoY (excluding residential business) with EBITDA margin of 42.7%. We maintain ‘BUY’ on the stock with SoTP-based TP of INR994 (hotel business valued at 18x FY28E EBITDA; no change in target multiple)

For LEMONTRE IN, we expect ARR to increase 1.5% YoY to INR6,330 with occupancy of 76%. We expect revenue growth of 5.1% YoY, while EBITDA margin is likely to compress 60bps YoY to 43.9% due to loss of input tax credit, ongoing portfolio renovation and rising spends towards technology upgrade. We maintain ‘BUY’ on the stock with SoTP-based TP of INR138 (asset-heavy/asset-light businesses valued at 20x/22x FY28E EBITDA; no change in target multiple).

For SAMHI IN, we expect ARR to increase 5.7% YoY to INR6,799 with occupancy of 76%, and overall revenue growth of 11.0% for the quarter. We expect EBITDA margin to contract ~45bps YoY to 32.8%. We cut our FY27E/FY28E EPS estimates by 4%/6% and maintain ‘BUY’ on the stock with TP of INR220 valuing the stock at EV/EBITDA multiple of 10.5x FY28E EBITDA (no change in target multiple).

For PARKHOTE IN, we expect revenue to grow 7.5% YoY to INR1,658mn. ARR for owned hotels is expected to increase 5.8% YoY to INR7,760 with occupancy of 92%. We expect EBITDA margin of 28.8% in Q1FY27E. We maintain ‘BUY’ on the stock with TP of INR165 valuing the hotel business at 11.5x FY28E EBITDA (no change in target multiple) and Flurys at 1.5x FY28E sales (no change in target multiple).

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