Chalet Hotels Hits 52-Week High As Analysts Expect Post-Pandemic Boost

Shares of Chalet Hotels Ltd. rose to their highest in 52 weeks after Antique Stock Broking and IDBI Capital initiated coverage on the company with a 'buy' citing that it's well-positioned to benefit from the post-pandemic tourism revival.

JM Financial and Nirmal Bang also maintained their 'buy' ratings on the stock in their latest updates on Sept. 20 and Sept. 23, respectively.

Analysts expect the domestic hotel industry to bounce back stronger, supported by improving vaccinations and pent-up travel demand. The hospitality and travel were the sectors worst hit by the pandemic because of restrictions, causing massive losses in the fiscal ended March.

Shares of Chalet Hotels jumped as much as 14.5% to Rs 248 apiece as of 12:15 p.m. All six analysts tracking the company have a ‘buy’ rating, according to Bloomberg data. The average of 12-month consensus price targets implies an upside of 29.8%.

Here's what brokerages made of Chalet Hotels...

IDBI Capital

• Initiated coverage on Sept. 24 with 'buy' and a target price of Rs 295, implying a potential upside of 43%.

• Like Chalet in the domestic hospitality space considering its strong positioning in high-end branded hotels in key business cities.

• New hotels and commercial properties will strengthen earnings growth, with its hotel-led complementary mixed-use of real estate to drive operating margin expansion.

• Value unlocking opportunities in Koramangala project and inorganic growth opportunities.

• On a low base of FY21, net sales expected to grow at an annualised rate of 68% over FY21-24E, supported by net sales CAGR of 77% and 42% in hotels and retail-commercial segments, respectively.

• Initially growth to be driven by the leisure segment, and the corporate segment will follow suit.

• Chalet’s strong positioning in the business travel segment will drive revenue per room revival and aid net sales growth.

Antique Stock Broking

• Initiate coverage on Sept. 9 with a 'buy' and a target price of Rs 400, implying 130% upside from the current market price.

• Expect Chalet Hotels to witness strong revenue growth ahead on the back of both cyclical and secular tailwinds. Over FY21-25, the brokerage expects the company growing at a CAGR of 55%.

• Hotels segment likely to bounce back strongly and expect things to normalise by FY23/24E things.

• Revenues of Chalet Hotels to be better than pre-Covid-19 levels.

• Chalet's relationship with leading international hospitality brands such as the Marriott Group, along with premium locations and high-quality properties, will help it attract a larger customer base.

• Increasing competition to take on properties under management contracts is positive for the likes of Chalet Hotels that have good assets in key cities.

• Chalet Hotels will have a better negotiation power during renegotiation of contracts.

JM Financial

• Maintains 'buy' rating with a target price of Rs 300, implying a potential upside of 63.5%.

• Chalet’s aggressive cost-saving measures during the lean period should lead to a 10% permanent reduction in overall costs, driven by employee and utility expenses.

• With increased contribution from the annuity portfolio (30% of revenue in FY24), Ebitda margin should rise sharply in FY24 (48%).

• Chalet has value unlocking potential—expansion of 266 rooms with nominal capex and potential resolution of the Koramangala project.