Time To Check-In To This Small Cap Hotel Stock: ICICI Securities

ICICI Securities has initiated coverage on Chalet Hotels Ltd with a BUY rating and an SOTP based target price of Rs 603 per share. The brokerage firm values 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 Rs 17.6 billion over the same period," the brokerage has said.

Asset owner with marquee assets in key geographies across India

Part of the K Raheja Corp group, Chalet is an owner, developer, asset manager and operator of high-end hotels and a hotel led mixed-use developer in key metro cities in India such as Mumbai Metropolitan Region, Hyderabad, Bengaluru, and Pune. According to ICICI Securities, the Company's portfolio comprises nine fully operational hotels representing 2,802 keys (as of Jun'23), across mainstream and luxury segments, and commercial spaces, representing 1.5msf in close proximity to the hospitality assets. Majority of the company's hotels are operated by international brands such as Marriott International and The Accor.

Disclaimer

The above stock recommendation is taken from the report of broking firm ICICI Securities and is not a recommendation of either the author, nor Greynium Information Technologies. Greynium Information Technologies and the author are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.