Buy Chalet Hotels; target of Rs 1183 Prabhudas Lilladher

Prabhudas Lilladher's research report on Chalet Hotels

In 2QFY26, CHALET IN recognized residential revenues of Rs2,821mn with EBITDA margin of 38.0% and consequently reported results are not comparable on YoY basis or with our estimates. Excluding the residential business, CHALET IN’s operating performance was broadly in-line with our estimates with EBITDA margin of 41.0% (PLe 40.8%) aided by 4.6% growth in RevPAR and strong traction in leasing income. With launch of own brand ATHIVA, CHALET IN has transitioned into being a brand owner thereby reducing dependency on third party operators. The move will not only help save on loyalty fees but also opens a new business opportunity to expand via management contract route. The inventory expansion goal is pretty much on track with plans to add 30/390 rooms at Khandala/Delhi in the near term. Even annuity business has started gaining traction (77% occupancy in 2QFY26) with an expected monthly exit rental run-rate of Rs300mn by Mar-26E providing necessary cushion to cash flows.

Outlook

We broadly retain our estimates and expect sales/EBITDA CAGR of 17%/21% over FY25-FY28E. Retain BUY” with a TP of Rs1,183 as we value the hotel business at 24x Sep-27E EBITDA (no change in target multiple), annuity portfolio at a cap rate of 8.5% and the residential project at NAV of Rs17 per share.

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