Shares of Chalet Hotels have surged 51.91 percent in the last one year, climbing from ₹235 apiece to ₹357. From its all-time low of ₹99.60 reached on May 25, 2020, the stock skyrocketed 311.64 percent to reach a record high of ₹410 apiece on October 17, 2022.
Hotel stocks have been rallying strongly after the Indian hospitality sector recovered to its pre-Covid levels as a result of factors such as the bounce-back in domestic and international tourism, the resumption of international flights, the recovery in business travel, and improving leisure and wedding demand.
On Tuesday, the stock soared by nearly 4.5 percent after the company's earnings came in ahead of analyst expectations. In Q3 FY23, Chalet Hotels posted a consolidated net profit of ₹102 crore for the quarter that ended in December, driven by a sharp increase in room rates and higher occupancy. The company had posted a net loss of ₹14.7 crore in the corresponding quarter of the last fiscal.
The revenue from operations for the third quarter of FY23 stood at ₹321.8 crore, an increase of 94.20 percent compared to ₹165.7 crore in Q3 FY22. The hospitality revenue increased by 87 percent YoY to Rs. 265 crore and 19 percent sequentially, while the retail and commercial portfolios reported flattish revenue growth at Rs. 24.40 crore.
The operating profit jumped nearly threefold to ₹113.5 crore for the December FY23 quarter, up from ₹40.4 crore last fiscal. The EBITDA margin during the quarter came in at 39.17 percent, an expansion of 1,455 bps YoY and 484 bps QoQ.
Furthermore, the company reported an ADR (average daily rate) of ₹10,168, a 100 percent increase over Q3 FY22 and a 28 percent increase QoQ. While, the occupancy for the quarter was at 65 percent. Higher occupancy and higher ADR led to an 18 percent sequential increase in RevPAR to Rs. 6,640.
Following the company's robust earnings, brokerage firm IDBI Capital has upgraded the stock from "hold" to "buy" and raised the target price to ₹450 apiece from ₹405 earlier, indicating an upside of 26 percent.
The brokerage stated that the stock is in a sweet spot to benefit from a healthy demand outlook in corporate travel in the near term. Healthy demand traction, demand-supply mismatch and Chalet’s focus on cost optimisation bode well for healthy earnings growth in future, it added.
Earlier in December, Prabhudas Lilladher initiated coverage on the stock with a target price of ₹455 apiece.
"We believe Chalet is best positioned to ride the industry upcycle because it has a strategically located metro-centric hotel portfolio where the threat of new room supply is low, as well as the necessary pricing power due to affiliation with marquee global brands such as Marriott and Novotel," said the brokerage.
As per the brokerage firm, the planned addition of 88/168/nearly 375-400 rooms in Pune/Hyderabad/Delhi, respectively, is likely to drive hotel business. The new inventory at Pune and Hyderabad is likely to be operational by end of FY23E, resulting in hotel revenue CAGR of 12 percent over FY23E-FY25E.
As the commercial portfolio of nearly 1.4mn sq ft in Mumbai and Bangalore becomes operational, the share of rental income is likely to rise to 18 percent by FY25E, said Prabhudas Lilladher
The brokerage firm expects revenue and PAT CAGR of 19 percent and 68 percent, respectively, over FY23E-FY25E, backed by room inventory addition at Pune & Hyderabad and an increase in commercial leasable area by nearly 2.6 times.
The stock closed 2.27 percent lower at ₹348.95 per share today on the BSE.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.