Buy Chalet Hotels; target of Rs 1071: Prabhudas Lilladher

Prabhudas Lilladher's research report on Chalet Hotels

In 1QFY26, CHALET IN recognized residential revenues of Rs4,391mn with EBITDA margin of 37.1% and consequently reported results are not comparable on YoY basis or with our estimates. Excluding the residential business, CHALET IN’s operating performance was better than our estimates with EBITDA margin of 41.6% (PLe 39.3%) aided by 9.5% growth in RevPAR and strong traction in leasing income. Apart from continuing momentum in RevPAR, inventory addition of 30/390 rooms at Khandala/Delhi is likely to drive near term growth in hospitality business. Even the annuity business has started gaining traction (77% occupancy in 1QFY26) with an exit rental run-rate of Rs250mn in June-25 providing necessary cushion to cash flows. We have cut our EPS estimates by 5.3%/6.1% for FY26E/FY27E as we have re-aligned our depreciation assumptions and inauguration timeline of the hotel in Delhi.

Outlook

We expect sales/EBITDA CAGR of 17%/21% over FY25-FY27E and retain BUY” with a TP of Rs1,071 as we value the hotel business at EV/EBITDA multiple of 24x (no change in target multiple), annuity portfolio at a cap rate of 8.5% and the residential project at NAV of Rs17 per share.