Apeejay Surrendra Park - Industry-Leading Occupancy, Attractive Valuations; Initiates With A Buy: Anand Rathi

Anand Rathi Report

Apeejay Surrendra Park Hotels Ltd. operates 30 hotels (seven owned, three leased, 20 under Management contract) with 2,298 rooms (~1,280/~1018 owned and leased/MC) in luxury categories: boutique upscale (The Park, The Park Collection), upper midscale (Zone by the Park, Zone Connect by the Park), at prime business destinations. It has the highest occupancy in the industry.

Following a strategy of pricing its rooms more attractively than peers, a well calibrated expansion strategy and reasonable valuation augur well for it (trading at 50%/10%/33% discounts to Indian Hotels Company Ltd./Lemon Tree Hotels Ltd./Chalet Hotels Ltd.).

Hence, we initiate coverage on the stock with a Buy and a 12-month target price of Rs 285 (valuing it at 18 times FY26 enterprise value/Ebitda, giving 35%/20%/10% discounts from Indian Hotels/Chalet Hotels/Lemon Tree).

Risks: High contingent liabilities (Rs 902 million/Rs 793 million in H1 FY24/FY23, ~15.7%/14.5% of FY24e/FY23 revenue), economic slowdown.

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