Buy Chalet Hotels; target of Rs 474: Prabhudas Lilladher

Prabhudas Lilladher's research report on Chalet Hotels

We increase our PAT estimates by 15%/3%/4% for FY23E/FY24E/FY25E respectively as we re-align our RevPAR assumptions in light of ARR breaching the Rs10K mark this quarter. Though occupancy still lags preCOVID levels (65% in 3QFY23 versus 75% in 3QFY20) it was due to holiday season (Diwali, Dasera & Christmas) where business travel suffers the most and slow recovery in foreign travel due to visa and direct flight connectivity issues. However, benefits of rate reset (ARR up by 11% over 3QFY20 base) will flow through as connectivity issues get resolved and business travel picks up. For instance, e-visas are already reactivated and frequency of direct flights between Mumbai and Bangalore is expected to rise from 9 per week to 16 per week by March.

Outlook

Overall, we maintain our positive stance on Chalet as 1) RevPAR recovery is in sight and 2) asset sweating should begin in next 6- 8 months. We expect revenue/PAT CAGR of 22%/60% over FY23E-FY25E and recommend BUY with a SOTP (refer exhibit 8 for more details) based TP of Rs474 (earlier Rs455).