Tourism Stock Soars 58% In 1-Year, Prabhudas Lilladher Sees 33% More Upside: Buy

Prabhudas Lilladher has recommended investors to buy shares of Tourism & Hospitality sector stock, Chalet Hotels Ltd with a target price of Rs 455 apiece implying an upside of 33% from the current market price of Rs 342 apiece.

According to the analyst, "We initiate coverage on Chalet Hotels Ltd (Chalet) with a 'BUY' rating, as it is a play on expected recovery in business travel complemented by an exposure to annuity business (18% share by FY25E) that acts as a hedge to deeply cyclical hospitality industry." Check key details below:

1. Chalet Hotels Ltd Stock Performance & Return

The last trading price of the mid cap stock is Rs 342 apiece with an intraday decline of 1.69%. The stock's 52-week high is Rs 409 apiece and 52-week low is Rs 211 apiece, respectively. The stock has given 58% return in last 1-year and declined a little over 1% in last 3-years. The company has a market capitalisation of Rs 7027 crore.

2. Strategically Located Hotel Portfolio With High Entry Barriers

As Chalet's portfolio is located in metro markets where penetration is high, threat of new room supply is low. Over next 5 years, new room supply in key metros where Chalet has presence is expected to grow at a CAGR of just 6% to 76,045 rooms by FY27E. Given high entry barriers amid limited availability of land, we believe Chalet's portfolio positioning is difficult to replicate thereby lowering competitive risks.

3. Strong Parentage

Affiliation with brands like Marriott and Novotel provides access to management expertise and marketing strategies of these global chains which not only helps in driving occupancies, but also lends strong pricing power. We expect ARR CAGR of 7% over FY23E-FY25E backed by recovery in business travel.

4. Outlook & Valuation

According to Prabhudas Lilladher, "We expect revenue/PAT CAGR of 19%/68% over FY23EFY25E, backed by room inventory addition at Pune & Hyderabad and increase in commercial leasable area by ~2.6x. We recommend 'BUY' with a SOTP based TP of Rs455 as we value hotels business at 16x FY25E EBITDA, annuity business at a cap rate of 10% and residential project at Bangalore at an NAV of Rs15 per share."

5. About Chalet Hotels

Part of the K Raheja Corp group, Chalet Hotels Limited 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.

The Company focusses on driving business efficiencies and sustainable growth right from the pre-development stage, through the entire lifecycle of assets, while maximising returns on every square foot owned and operated, according to its official website.

Disclaimer

The stock has been picked from the brokerage report of Prabhudas Lilladher. Greynium Information Technologies, the Author, and the respective Brokerage House 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.