Target: ₹1,039
CMP: ₹765.90
Chalet Hotels posted Q3 results that were in line with expectations, although there was a slight miss on profitability due to higher-than-anticipated depreciation and interest costs. The financials for both the hospitality and commercial lease rental segments were largely in line, with Chalet reporting a profit of ₹96.50 crore at the PAT level, slightly below our estimate of ₹110 crore profit.
Despite this, we maintain a positive outlook on Chalet due to the visibility of healthy room additions until FY29. The company’s strong cash generation from FY25 onwards will provide it with the resources to pursue potential growth opportunities through acquisitions.
The revenue contribution from the Mumbai Metropolitan Region (MMR) decreased from 63% to 56%, as the company strategically diversified towards other key markets such as Hyderabad and NCR. In MMR, the average daily rate (ADR) grew by 13% year-on-year to ₹12,972, demonstrating the company’s strong pricing power. However, occupancy decreased by 400 basis points to 74%, as Chalet focused on higher-paying clients.
We reiterate our Buy rating on Chalet with a lower target price of ₹1,039. The company’s strong cash generation from FY25 onwards is expected to drive inorganic growth opportunities. With a reputable promoter pedigree in the Raheja Group, Chalet has the operational expertise, management capabilities, and financial flexibility to support its continued growth. Additionally, the company’s partnerships with global brands ensure high occupancy rates and healthy average room rates.
Published on January 31, 2025.
