Chalet Hotels Q1 Results Review - Expands Into Leisure Markets: Prabhudas Lilladher

Prabhudas Lilladher Report

We cut our Ebitda estimates of Chalet Hotels Ltd. by 3%/1% for FY25E/FY26E as we re-align our RevPAR growth assumptions and annuity leasing timelines in light of weaker performance in Q1 FY25. Hospitality segment reported same-store RevPAR growth of 4% due to elections, severe heat wave and lower number of auspicious wedding days.

Nonetheless, management indicated of a strong recovery in July 2024. Further, while leasing timelines have witnessed some delay, 90% of the portfolio is expected to be leased out by end of the year, resulting in strong traction in annuity income from FY26E.

Though there are early signs of headwinds in RevPAR growth, buoyed by operationalization of ~200 new rooms in Lonavala and Bengaluru coupled with expansion in lease portfolio, we expect revenue/Ebitda CAGR of 19%/25% over FY24-FY26E.

We maintain our ‘Accumulate’ rating on the stock with a revised target price of Rs 887 (earlier Rs 902) as we value the hotel business at enterprise value/Ebitda multiple of 23 times (no change in target multiple), annuity portfolio at a cap rate of 8.5% and the residential project at net asset value of Rs 21 per share.

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