Chalet Hotesl Ltd Quarterly Results Q4 FY 25 stock analysis

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Sector Outlook: Positive

Strong Q4FY25 performance with on-track expansion plans

In Q4FY25, Chalet Hotels Limited maintained a robust financial position, reporting a consolidated revenue of Rs. 5,220 million, marking a 25% YoY growth and 14% QoQ growth. Revenue from the hospitality segment increased 20% YoY to Rs. 4,604 million, supported by a rise in Average Room Rate (ARR) to Rs. 14,345 and an occupancy rate of 76%, which was flat on YoY basis, contributing to a 21% YoY improvement in RevPAR to Rs. 10,909 driven by performances in Pune, Bengaluru and MMR. EBITDA showed strong growth, reaching Rs. 2,414 million, a 32% increase YoY, with the company achieving an EBITDA margin of 46.3%. On the annuity business front, the company registered a revenue of Rs. 619 million, a 75% YoY growth, with a margin of 80.4%. Attributing to the strong momentum, the company’s real estate segment sales increased with the sale of 23 apartments in Q4FY25 and commands an average selling price of Rs. 19,800 per square foot. The company registered a net profit of Rs. 1,238 million in Q4FY25. During the quarter, the company strategically acquired The Westin Resort & Spa, Himalayas with 141 keys, strengthening its position in the high-growth leisure, spiritual and wellness tourism market. The company also expanded its Marriott Hotel Whitefield in Bengaluru with 121 keys, which is operational from May 2025 (Q1FY26). Additionally, the ‘Taj’ at New Delhi Airport (385-390 rooms) and the ‘Hyatt Regency’ in Airoli, Navi Mumbai (280 rooms) are scheduled for completion in FY27. CIGNUS Powai Tower II will add 900,000 square feet by FY27 to the office portfolio. The company’s Duke Retreat (Lonavala) is in its Phase 2 and is expected to be completed in H1FY26. With a focus on geography diversification, the company plans to develop a luxury resort in Goa with a capacity of 170 rooms on 15 acres of beachfront land in Bambolim, North Goa. To support its expansion plans, the company anticipates incurring capex of approximately Rs. 23 billion over the next two to three years, and the majority of this capex will be done through internal accruals. Looking forward, Chalet Hotels continues its strategic growth initiatives with ongoing expansion, highlighting the company’s commitment to its growth trajectory.

Key Concall Highlights

The demand-supply ratio continues to favour the Indian hospitality sector, with demand expected to grow at 10% for the next two to three years, whereas supply remains a lag.
Despite a sluggish start to FY25 due to the election, the company managed to deliver a strong annual performance driven by corporate travel, a healthy wedding season and leisure travel.
Chalet Hotels aims to diversify its portfolio, targeting 20% in the leisure segment, although it currently falls short of this goal.
Management believes there is a significant growth opportunity in Goa and is making a substantial investment. Recently, the company has entered into a binding agreement to acquire Lakeview Mercantile Company Private Limited, a company that owns a 15-acre beachfront parcel in Bambolim, North Goa. This land comes with the potential to develop a ~170 room luxury resort, expected to open in approximately three years, post approvals. The project will be funded through internal accruals.
As of 31st March 2025, the company’s debt is Rs. 19 billion. The company had raised Rs. 751 million during the quarter from allotment of listed NCD and has further received board approval for raising up to Rs. 10 billion via NCDs or other debt instruments, keeping financing options flexible.
The company has planned capital expenditures of approximately Rs. 23 billion over the next three years. All capex will be funded through internal accruals. During FY25, the company deployed Rs. 11 billion in capital expenditures, the highest in a single year.
Within the annuity portfolio, the Sahar asset is at 98% occupancy, while the new Bengaluru asset is at 70% occupancy. The most recent Powai asset (Cignus Powai Tower 1) has a lower occupancy of 57%.
There has been an unexpected delay in the project at Airoli due to a change in NGT regulations, which has impacted several projects within a 5-kilometer radius of the national park.

Valuation and Outlook

Chalet Hotels’ strategic focus on key metro markets positions its room inventory favourably amidst the revival in corporate business travel and a boost from the government. The company’s strong asset base in these cities enhances its negotiation power during contract renewals, which is particularly beneficial amid rising demand for management contracts. Q4FY25 marked one of Chalet’s strongest quarters, with revenues growing by over 25%. The management expects to have some impact of the geopolitical tension as the management has noticed a few cancellations in MICE, but it is anticipated that demand for domestic travel will recalibrate soon. However, foreign tourism may take a longer time to recover. At the same time, on the annuity business side, the company is poised for significant traction in leasing income in the coming two to three quarters. The company also aims for significant debt reduction over the next two years. The management remains confident in sustained growth, buoyed by the anticipated increase in room demand and rental rates across key markets. Looking ahead, Chalet Hotels forecasts a robust growth trajectory, aided by higher RevPar, ramp-up of its newly developed projects, expansion into the luxury segment and improved occupancy in its annuity business. Given the strong operational performance anticipated alongside debt reduction initiatives, we maintain a positive outlook on Chalet Hotels Limited, expecting substantial improvement in its return profile in the coming years.