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ICICI Securities Report
While industry peers are focusing on the asset-light expansion route, Chalet Hotels Ltd. has chosen to grow its hotel room and office rental portfolio over FY23-27E through the ownership route (mix of existing project expansion and long-term leases).
We believe that this is the right strategy in an industry upcycle (FY23-28E) and we estimate hotel Ebitda compound annual growth rate of 18.6% over FY23-26E at an Ebitda margin of ~45%.
We retain our 'Buy' rating with a revised target price of Rs 715/share (earlier Rs 652) as we roll over to December-25E earnings (earlier Sep-25E) and value the company on SoTP basis at 19 times EV/Ebitda for hotel business (earlier 18 times), 8% cap rate for rental assets and residual value of Vivarea, Bengaluru residential and office projects.
Key risks are fall in hotel revenue per available rooms and weak office leasing.
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