IDBI Capital has maintained its BUY recommendation on Apeejay Surrendra Park Hotels Ltd. (ASPHL) with a target price of Rs154, implying an upside potential of approximately 32% from the current market price of Rs116. While the hospitality company delivered a softer-than-expected Q4FY26 performance due to geopolitical disruptions and room cancellations in key markets such as Delhi and Hyderabad, its long-term growth narrative remains intact. Strong occupancy levels, an ambitious expansion roadmap, robust growth in the Flurys business, and a significant increase in hotel inventory underpin management’s confidence in delivering sustainable earnings growth over the next several years.

IDBI Capital Reaffirms BUY Call Despite Quarterly Earnings Miss

IDBI Capital has retained its BUY rating on Apeejay Surrendra Park Hotels after reviewing the company’s Q4FY26 results.

The brokerage acknowledged that the company’s quarterly performance fell short of expectations across key financial parameters. However, analysts believe the weakness was largely temporary and driven by external events rather than structural issues in the business model.

The brokerage has set a target price of Rs154 based on an FY28E EV/EBITDA multiple of 11x. Although earnings estimates for FY27 and FY28 have been marginally revised lower, the long-term investment thesis remains compelling due to the company’s aggressive expansion plans and resilient operating performance.

Geopolitical Headwinds Impact Fourth-Quarter Performance

Demand disruptions during the quarter weighed heavily on revenue growth and profitability.

Management attributed the weakness primarily to significant room cancellations in Delhi and Hyderabad caused by geopolitical tensions and conflict-related disruptions in the Middle East.

For Q4FY26:

The decline in profitability was amplified by higher operating costs, elevated finance expenses, and increased depreciation associated with the company’s ongoing expansion initiatives.

Occupancy Remains Among the Best in the Industry

Despite quarterly challenges, ASPHL continued to demonstrate exceptional occupancy performance across its flagship properties.

The company maintained portfolio occupancy of 91% during FY26, matching the previous year’s level despite industry volatility.

Among standout performers:

The Park Kolkata achieved an extraordinary 100% occupancy for both Q4FY26 and the full fiscal year.
The Park Chennai reported occupancy of approximately 95%.
The Park Navi Mumbai maintained occupancy exceeding 93%.

Average Room Rate (ARR) for FY26 increased 9% year-over-year to Rs8,304, while Revenue Per Available Room (RevPAR) grew 7% to Rs7,584.

Although Q4FY26 ARR rose 3% year-over-year to Rs9,165, it declined sequentially due to temporary demand disruptions. Management expects pricing power to strengthen once operating conditions normalize.

Expansion Pipeline Could Transform Business Scale by FY30

The most significant takeaway from the earnings review is management’s ambitious growth roadmap.

The company plans to more than double its hotel portfolio over the next four years.

Key expansion targets include:

For FY27 alone, management expects:

Addition of 12 hotels.
Incremental 472 room keys.
Eight properties operating under an asset-light model.
Total key inventory crossing 3,000 rooms.

This expansion strategy balances owned assets with management contracts and franchise arrangements, enabling faster growth while optimizing capital allocation.

Flurys Emerges as a Powerful Growth Engine

The company’s food and beverage ecosystem continues to gain strategic importance.

Food and beverage revenue crossed Rs3 billion during FY26 and now contributes roughly 43% of total hospitality ecosystem revenues.

Particularly noteworthy is the performance of Flurys, the company’s iconic confectionery and café brand.

Highlights include:

More than 110 operating outlets.
Revenue growth of 29% in FY26.
Plans to add over 30 outlets within the next ten months.
Expansion into NCR, Pune, and Bengaluru.
Target of reaching 100 outlets in West Bengal by 2027.

Management has also adopted an asset-light expansion strategy for Flurys, opting to outsource production to qualified vendors rather than build expensive centralized manufacturing facilities. This should support faster scaling while preserving returns on capital.

Premiumization Strategy Could Support Future ADR Growth

Management is investing aggressively to improve room rates and guest experience.

Several renovation projects are planned across key properties in Chennai, Bengaluru, Kolkata, and Visakhapatnam.

The company is also progressing with major development projects including:

A 78-room luxury boutique hotel in Juhu, Mumbai.
A 100-room hotel project in Visakhapatnam.
Multiple Zone by The Park and Zone Connect properties targeting leisure and mid-market travelers.

These initiatives are expected to enhance brand positioning while driving higher average room rates over the medium term.

Financial Outlook Suggests Strong Earnings Recovery

IDBI Capital forecasts a meaningful acceleration in earnings over FY27 and FY28.

Projected financial performance is as follows:

The brokerage expects EBITDA margins to improve from 30.8% in FY26 to 33.2% by FY28, reflecting operating leverage from portfolio expansion and higher room yields.

Investment View: Temporary Setback, Structural Growth Story Intact

The latest quarter may have disappointed on earnings, but it has done little to undermine the long-term growth narrative.

Apeejay Surrendra Park Hotels continues to benefit from industry-leading occupancy rates, expanding hospitality infrastructure, strong brand equity, growing contribution from Flurys, and a rapidly scaling asset-light portfolio. While geopolitical disruptions temporarily affected room demand, management’s guidance suggests confidence in both revenue acceleration and margin recovery.

With a target price of Rs154 and an implied upside of roughly 32%, IDBI Capital believes the recent weakness offers investors an opportunity to participate in one of India's emerging hospitality growth stories.

Target Price: Rs154
Current Market Price: Rs116
Rating: BUY
Potential Upside: 32%

Disclaimer: Investors should conduct their own due diligence and assess their risk tolerance before making investment decisions. Equity investments are subject to market risks, and future performance is not guaranteed.