scorecardresearchPrabhudas Lilladher says Chalet Hotels best-placed to ride upcycle; expects stock to rise 30%

Prabhudas Lilladher says Chalet Hotels best-placed to ride upcycle; expects stock to rise 30%

Updated: 29 Dec 2022, 11:51 AM IST
TL;DR.
Prabhudas Lilladher has a target price of 455 for Chalet Hotels, implying a nearly 31 percent upside from the stock's previous closing price of 348.65 on the BSE.
According to a MintGenie poll, 5 analysts on average have a ‘buy’ call on Chalet Hotels.

According to a MintGenie poll, 5 analysts on average have a ‘buy’ call on Chalet Hotels.

Brokerage firm Prabhudas Lilladher has initiated coverage on Chalet Hotels with a ‘buy’ rating as the brokerage firm believes the company is best-placed to ride the industry upcycle.

Prabhudas Lilladher has a target price of 455 for Chalet Hotels, implying a nearly 31 percent upside from the stock's December 28 closing price of 348.65 on the BSE.

The stock has witnessed a strong gain of 56 percent in the last one year against a 5 percent gain in the benchmark Sensex.

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Chalet Hotels stock in last one year

"Chalet Hotels is a play on an expected recovery in business travel complemented by exposure to annuity business (18 percent share by FY25E) that acts as a hedge to the deeply cyclical hospitality industry," said Prabhudas Lilladher.

"We believe Chalet is best placed to ride the industry upcycle as it has (1) a strategically located metro-centric hotel portfolio where the threat of new room supply is low (new supply CAGR of 6 percent over the next five years in key metro cities), and (2) requisite pricing power amid affiliation with marquee global brands like Marriott and Novotel," said the brokerage firm.

The brokerage firm expects an ARR CAGR of 7 percent over FY23E-FY25E backed by recovery in business travel.

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, adding the rising share of rental income not only provides a hedge to the cyclicality of the hotel business but is also expected to improve the cash flow situation (EBITDA margin of nearly 80-85 percent).

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.

According to a MintGenie poll, 5 analysts on average have a ‘buy’ call on the stock.

Disclaimer: The views and recommendations given in this article are those of individual analysts and broking firms. These do not represent the views of MintGenie.

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First Published: 29 Dec 2022, 11:51 AM IST