Buy Chalet Hotels; target of Rs 652: ICICI Securities

ICICI Securities research report on Chalet Hotels

We believe that Chalet Hotels (Chalet) is well poised to benefit from the strength in demand, especially for premium and luxury hotels in India’s Tier cities. While industry peers are focusing on the asset light expansion route, Chalet has chosen to grow its hotel room and office rental portfolio over FY23-27E through the ownership route (mix of existing project expansion and long-term leases). We believe that this is the right strategy in an industry upcycle (FY23-FY28E) and we estimate hotel EBITDA CAGR of 18% over FY23-26E at EBITDA margins of 44-45%.

Outlook

We retain our BUY rating with a revised SOTP based target price of INR652/share (earlier INR603) as we roll forward to Sep’25 SOTP basis (earlier Jun’25) and value the company at 18x EV/EBITDA for hotel business, 8% cap rate for rental assets and residual value of Vivarea, Bengaluru project.