Shares of Chalet Hotels have gone up over 23% since the start of the year. Analysts at ICICI Securities are bullish on the stock as they think that the company is positioning itself nicely to “capture the expected hotel industry upcycle over FY23-28E.”

The Chalet Hotels Analyst: Adhidev Chattopadhyay at ICICI Securities initiated the coverage on the stock with a ‘buy’ rating and a price target of ₹603 – indicating a close to 39% upside from the stock’s last closing price of ₹434.25.

The Chalet Hotels Thesis: The analysts highlighted that while other companies in the industry are mainly focusing on the asset-light expansion route, Chalet has decided to grow its hotel room and office rental portfolio by actually owning the properties.

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They plan to achieve this growth in the coming 3-4 years through a combination of expanding existing projects and signing long-term leases. The note said that the company intends to take its operational hotel portfolio from 2,634 keys as of Mar'23 to 3,760 keys by FY26E. Chattopadhyay added that this is the right strategy in an industry upcycle (FY23-FY28E).

The firm expects the K Raheja Corp Group company to clock an 11% revenue CAGR over FY23-26E to
reach revenue of around ₹1,386 crore from its existing hotels. The firm expects revenue from new properties to be around ₹2,553 crore in FY26. The brokerage added that it estimates EBITDA margins from existing hotels to stabilise at 44-45% between FY24-26E.

Price Action: Chalet Hotels’ share price was up 1.31% to trade at ₹439.95 on Wednesday afternoon.

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