Chalet Hotels Q3 Results Review - Risk-Reward Turning Unfavorable!: Dolat Capital

Dolat Capital Report

Chalet Hotel Ltd. Q3 FY24 was healthy driven by robust 18% RevPAR growth YoY (est 14%), higher other income and lower tax. Revenue/Ebitda/APAT grew by 29/46/74% YoY. Key hotel segment revenue/Ebitda was +29/50% YoY.

Chalet is poised for a strong revenue/Ebitda/APAT compound annual growth rate of 16/20/45% over FY24-26E led by

1. increase in hotel rooms by 7% (~200 in FY26)

2. 5.5% RevPAR CAGR and

3. office portfolio to become ~2 times (1.2 to 2.4mn sqft) driving the segment Ebitda ~3 times (Rs 0.8 billion to ~Rs 2.2 billion) and

4. steep reduction in debt/ interest as we factor Rs 20 billion fund-raise at ~Rs 700/sh.

The above factor makes Chalet an attractive growth play. But, steep run up in share price (14/34/109% in trailing 1/3/12m) and increased competition in core Mumbai city are key risk. D/G to 'Sell' with revised target price of Rs 650 @ 12 times enterprise value/E to commercial and 20 times enterprise value/E to Hotel business (versus 22 times for Indian Hotels Company Ltd.), blended EV/E is ~18 times FY26E (Rs 610 @ FY26E EV/E).

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