Summary
Chalet Hotels Ltd.’s (Chalet) Q3FY25 result was in-line with our estimate on net sales front, while EBITDA and PAT were beat to forecast. The company delivered yet another robust quarter on operational parameters, reflecting healthy demand momentum of domestic hospitality industry. Further, the management expects to benefit from the two new upcoming airports in Mumbai and Delhi as it will increase the passenger carrying capacity. Chalet’s inventory addition at existing hotels and foray into Delhi, Goa, Kerala markets paves the way for sustainable hospitality segment earnings growth over a long term horizon. The management’s guidance of healthy double digit RevPAR growth on a high base of FY24 bodes well for superior earnings in mid-term horizon. We have rolled over to FY27E. Given the stock has corrected recently, there is meaningful upside from current level. We upgrade the stock to BUY with a revised TP of Rs984 (earlier Rs924), assigning 22x EV/EBITDA on FY27E.
Key Highlights and Investment Rationale
Strong operational performance continues: Chalet reported yet another quarter of improved operations on key parameters. The ADR increased by 18% YoY to Rs12,944. Also, RevPAR improved by 16% YoY to Rs9,090 while Combined Occupancy was at 70%. Net sales was higher by 22.5% YoY to Rs4.5bn, while EBITDA was up by 23.3% YoY to Rs2bn. Adjusted net profit was up by 36.6% YoY to Rs0.9bn.
Growth momentum to continue, BUY with a TP of Rs984: Chalet has been our preferred pick amongst the domestic hospitality space. The company’s focus on strengthening leisure segment by foraying into NCR, Goa and Kerala bodes well for RevPAR growth. We anticipate Chalet will outperform the industry growth rate on RevPAR and will have healthy operating margin improvement in near term. BUY with a TP of Rs984.
Chalet Hotels has been the preferred pick amongst the domestic hospitality space
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