– Samhi Hotels – Turnaround with Tailwinds

Sami Hotels Limited Q2 FY25 Earnings Conference Call Summary

Asset income, representing revenue generated from hotels, reached INR 266 crores, a 20% year-over-year increase. This growth was driven by strong same-store sales and the inclusion of the recently acquired AIC portfolio.
Same-store asset revenue experienced a robust 13.3% year-over-year growth, leading to a 20.2% EBITDA growth and a margin expansion of nearly 40%.
Asset EBITDA, reflecting hotel-level profitability, reached INR 104 crores, a 28% year-over-year increase.
Asset EBITDA margin was 39.1% for the quarter, slightly diluted by the AIC portfolio which stood at 36%. Management anticipates material margin improvement in upcoming quarters as the integration of AIC properties continues.
Consolidated EBITDA reached INR 97 crores, marking an impressive 80% year-over-year growth. The consolidated margin also reached 36%, with potential for further expansion.
Depreciation expense and finance costs remained stable at INR 29 crores and INR 56 crores, respectively.
Reported profit after tax stood at INR 12.6 crores.
Management expects material EBITDA expansion in the second half of FY25 due to higher revenue and strong flow-through, driven by average room rate (ARR) growth.

Seasonally stronger H2 FY25 is anticipated to result in substantial margin expansion, driven by increased EBITDA, stable depreciation, and stable finance costs.
Integration of the AIC portfolio is expected to significantly improve margins.

Same-store assets (excluding recently acquired and pre-opening properties) demonstrated strong performance, achieving 16.5% year-on-year RevPAR growth in Q2.
Upscale hotels in Bangalore and Hyderabad showed significant potential with trailing twelve-month revenue exceeding INR 50 lakhs per room.
The recently acquired AIC portfolio is undergoing integration and conversion to managed hotels under Marriott, leading to margin improvements.
Two midscale AIC hotels in Pune and Jaipur are being rebranded and repositioned as upscale Courtyard by Marriott and Tribute Portfolio hotels, respectively.
Management anticipates that the share of upscale hotels in their portfolio will increase significantly, leading to higher revenue per key.

Sami Hotels has secured three new upscale and upper upscale hotels with approximately 525 rooms in Bangalore and Hyderabad.
These additions are expected to materially augment portfolio growth and drive incremental revenue over the next 3-4 years.
Internal growth levers, including the integration of AIC properties, renovation, and rebranding initiatives, are expected to improve performance further.
The company is progressing with recycling capital through the sale of non-strategic assets to maintain a strong balance sheet and reduce leverage.
Management emphasizes their focus on capital efficient growth and finding opportunities suitable for different market cycles.

Potential downward cycles in the industry, impacting demand and profitability.
Capacity constraints in the aviation industry, limiting passenger traffic and potentially affecting hotel demand.
Execution risks associated with new hotel projects, including delays and cost overruns.
Competition from other hotels in key markets.

Bangalore and Hyderabad markets continue to demonstrate strong growth, absorbing significant office space and experiencing high air passenger growth.
Office space absorption in these markets indicates robust demand and positive economic activity.
The hotel industry is experiencing slower supply growth compared to office space additions, creating a favorable demand-supply dynamic.
Aviation capacity constraints are impacting passenger traffic, potentially influencing hotel demand in the short term.

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