ICICI Securities research report on Chalet Hotels
We value the company on Jun’25 SOTP basis at 18x EV/EBITDA for hotel business, 9% cap rate for rental assets and residual value of Vivarea, Bengaluru project. 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%. We believe that total operating cash flow of Rs22.1bn over FY24-26E is adequate to fund incremental capex of Rs17.6bn over the same period. Key risks are fall in hotel RevPARs and weak office leasing.
Outlook
We initiate coverage on Chalet Hotels Ltd. (Chalet) with a BUY rating and an SOTPbased target price of Rs603/share.
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