Jefferies On The Leela Palaces: Shares of Leela Palaces, Hotels and Resorts rose 1.5% in trade on Monday after foreign brokerage Jefferies initiated coverage on the luxury hotel operator with a ‘Buy' rating and a target price of Rs 675 per share.
The stock surged 1.43% to hit an intraday high of Rs 562.30 per share. At 9:20 am, the stock was trading at Rs 562.30, at day's high. In comparison, the BSE Sensex was trading at 0.34% lower at 77,003 levels.
Jefferies sees The Leela as a “luxury proxy” for India's premiumisation theme, with the company positioned to benefit from rising demand for high-end and experiential travel.
The brokerage's positive view is supported by the company's differentiated positioning, owned-room expansion strategy under Brookfield and increasing exposure to leisure destinations.
Why Jefferies Likes Leela Hotels
A key attraction for Jefferies is The Leela's owned-led expansion strategy. The company has the highest owned-room growth among its peers, with owned rooms expanding at an estimated 8% CAGR and accounting for around 50% of its room mix.
The brokerage also expects the company's increasing exposure to leisure destinations to support growth as demand shifts towards premium experiences.
Jefferies forecasts a 19-20% CAGR in EBITDA and PAT between FY26 and FY29, underpinning its positive stance on the stock.
The Leela currently operates 15 hotels with 4,162 rooms, while another 10 hotels comprising 1,095 rooms are in the pipeline.
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Q1 Shows Operating Leverage
The company's June-quarter performance provided an early indication of operating leverage in the business.
Revenue rose 28% YoY to Rs 352 crore, while EBITDA jumped 41.6% to Rs 143 crore. EBITDA margin consequently expanded to 40.6% from 36.7% a year earlier.
Net profit increased more than six-fold to Rs 49 crore, compared with Rs 8.8 crore in the year-ago period.
RevPAR, or revenue per available room, rose 17% YoY to Rs 13,982, supported by a 10% increase in average daily rate to Rs 20,722 and a 4% improvement in occupancy to 67.5%.
Management attributed the performance to strong domestic leisure and MICE demand despite temporary international travel headwinds.
Expansion Into High-Value Destinations
The company continues to add luxury properties in destinations with strong experiential-tourism potential.
During the quarter, The Leela signed an agreement for a 30-key wildlife resort in Maharashtra's Tadoba Tiger Reserve, with estimated capex of around Rs 120 crore and completion targeted for CY30.
It also launched The Leela Coorg Forest Sanctuary and expanded ARQ by The Leela with a second club in New Delhi.
The company had net debt of Rs 1,331.9 crore as of June 30, with net debt-to-EBITDA at 1.6x.
For Jefferies, the combination of luxury premiumisation, owned-room growth and an expanding high-end leisure footprint provides the basis for its positive long-term view on Leela Hotels.
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