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Sector Outlook: Positive
Strong Q2FY25 performance with on-track expansion plans
In Q2FY25, Chalet Hotels Limited reported strong financial performance with a total income of Rs. 3,770 million, up 20% YoY and 4% QoQ, led by a robust hospitality segment. Revenue from this segment rose 18% YoY, with ARR at Rs. 10,532 and stable occupancy at 74%, resulting in a 10.3% YoY RevPAR improvement. EBITDA grew by 19% YoY to Rs. 1,495 million, achieving a margin of 39.7%. Despite these gains, the company posted a net loss of Rs. 1,385 million. Looking ahead, Chalet Hotels is expanding at Bengaluru Marriott, The Dukes Retreat, and adding significant capacity at its upcoming Taj and Hyatt Regency properties, as well as CIGNUS Powai Tower II by FY27. The company also aims to reach Net-Zero GHG Emissions by 2040, aligning with global sustainability goals.
Key Concall Highlights
H1FY25 Performance: The first half was weaker due to fewer wedding dates and adverse weather; however, management is optimistic for a strong H2FY25, backed by favorable economic conditions, demand-supply gaps, and long-term sector growth, with some margin fluctuations expected (Q2FY25 EBITDA margin ~39.7%).
Powai Towers Leasing: Expected to reach ~90% occupancy by FY25-end, with increased residential revenue recognition and related costs projected in Q4FY25.
New Project in Goa: Acquisition of an 11-acre beachfront plot in Varca, Goa, for an upper-upscale 5-star resort with 170 sea-facing rooms. Expected opening is in three years, with a final deal closure in two weeks. Projected CapEx is Rs. 20 million per key, with anticipated room rates between Rs. 17,000 to Rs. 25,000.
CapEx Plan: Approximately Rs. 15 billion in capital expenditures over the next two years, including:
- Rs. 6.5 billion for new commercial towers,
- Rs. 6 billion for hospitality projects (DIAL, Bengaluru, Dukes),
- Rs. 2.5 billion for other expenses, including Rs. 1 billion for repairs.
- All CapEx to be funded through internal accruals.
- Debt Outlook: Debt expected to be maintained within ~Rs. 18.5 billion to Rs. 19 billion.
DIAL Property Delay: T3 DIAL property in Delhi delayed due to flooding; now expected to open by Q1FY27 (originally Q4 FY26).
Hotel Performance:
- Novotel Pune: Achieved 78% occupancy with 10% YoY ADR growth.
- Mumbai Hotels: ~7% ADR growth, with new supply in Navi Mumbai and The Westin, Powai stabilizing.
- Sheraton Property: 5% ADR increase.
- Mindspace Hyderabad: 15% occupancy growth, with ~35 rooms at Four Points by Sheraton, Navi Mumbai, under renovation, expected completion by July 2025.
- Bengaluru Real Estate Project: Sold 170 units at an average price of Rs. 19,700 per sq. ft., with Q2FY25 sales averaging Rs. 21,800 per sq. ft. 68 units remain, projected to be sold within the next 2-3 quarters, with revenue and costs to be recognized starting Q4FY25.
Ongoing Renovations & Expansions:
- Bengaluru Marriott Whitefield: ~125-130 rooms ready by Q3FY25.
- Dukes Retreat: 65 rooms set for Q4FY25 completion.
- Future Projects: Taj at Delhi Airport and Hyatt Regency Airoli expected by FY27; new Varca hotel (~170 rooms) planned for FY28.
Valuation and Outlook
Chalet Hotels is well-positioned in key metro markets, benefiting from the revival in corporate travel, which strengthens its negotiating power for contract renewals. Q2FY25 saw over 20% revenue growth, marking one of its best quarters, with H2FY25 expected to continue strongly due to increased wedding dates and business activity. The annuity business is set for a boost, with 90% of its portfolio projected to be leased by FY25’s end. The company plans significant debt reduction within two years and anticipates consolidated revenue and PAT to grow at a CAGR of 15% and 38%, respectively, from FY25 to FY26, supporting a positive long-term outlook.
