Target: ₹1,080
CMP: ₹882.35
We initiate coverage on Chalet Hotels with a BUY rating based on strong growth prospects on account of Strong presence in key metro markets with limited supply, robust expansion pipeline, presence in commercial real estate provides much needed diversification, Healthy B/S which allows company to pursue incremental growth opportunities, Addition of leisure portfolio opens new avenue for growth.
Launch of new airport in Mumbai should drive growth in Foreign Tourists Arrivals (FTAs), which can directly benefit Chalet, given its tie-up with international brands like Marriott and Hyatt.
Chalet hotels has proved its expertise as an asset owner and developer over the years and we expect it to be the key beneficiary of the ongoing industry upcycle. CRE business provides much needed diversification to the cyclical nature of the hospitality business with robust operating margins and consistent cash flows which can be reinvested into hospitality business and used for debt repayment.
We expect Chalet to post robust Revenue/EBITDA (Ex-Real estate) CAGR of +22/+29 per cent over FY25-27E, led by strong growth in hospitality and CRE segments. We value the hospitality business at FY27E EV/EBITDA of 25x and CRE business at Cap rate of 8%. We value real estate business on NAV basis and arrive at SOTP based target price of ₹1,080.