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Chalet Hotels - Asset Ownership Led Growth: ICICI Securities

Riding the hotel industry upcycle through a strong expansion plan

<div class="paragraphs"><p>JW Marriott Mumbai Sahar. (Source: Company Website)</p></div>
JW Marriott Mumbai Sahar. (Source: Company Website)

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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.

Click on the attachment to read the full report:

ICICI Securities Chalet Company Update.pdf
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