ICICI Securities has reiterated a Buy call on Chalet Hotels Ltd, setting a 12-month target price of Rs 980 versus a current market price of Rs 795, implying about 23% upside. The brokerage’s thesis rests on a temporary slowdown in Q4FY26, a much stronger earnings runway from FY27 onward, and a robust expansion pipeline across hospitality and commercial real estate. Chalet’s core ex-residential business grew, but hotel performance was muted because of geopolitical stress, weaker foreign tourist inflows, and construction-related disruption at Westin Powai. Even so, the company’s annuity business remained a standout, and the research house believes that fresh capacity, better demand normalization, and premium asset additions should lift growth materially over the next two years.

Quarterly Performance Was Mixed

Chalet’s Q4FY26 was not a blowout, but it was far from weak in structural terms. Consolidated revenue rose 6.9% year on year to Rs 558.2 crore, while EBITDA increased 10.1% to Rs 265.8 crore, with margins improving to 47.6%. The hotel business delivered only 3% revenue growth to Rs 474 crore as occupancy slipped 770 basis points to 68.2%, even though average room rates increased 7.7% to Rs 15,456. RevPAR declined 3.2% to Rs 10,544, reflecting a tough operating backdrop rather than any meaningful deterioration in the brand’s long-term positioning.

The annuity segment, by contrast, carried the quarter on its shoulders. Revenue from this business jumped 36.8% to Rs 84.7 crore, supported by a higher leased area and healthy occupancy of 88%. EBITDA rose 42.2% to Rs 70.8 crore, and margins widened to 83.6%, underscoring the high-quality cash flow profile of the commercial portfolio. Adjusted PAT increased 31.6% to Rs 163 crore, which signals that the company’s diversified model is doing exactly what management intended: cushioning cyclicality in hospitality with sticky annuity income.

Hospitality Hit By Disruption

The soft patch in hospitality was driven by external shocks, not by a collapse in demand fundamentals. ICICI Securities said the quarter was affected by lower foreign tourist traffic due to West Asia tensions and by temporary disruption at Westin Powai because of CIGNUS II construction. January was weak because of a sparse wedding calendar and the absence of large events, February recovered strongly, and March again turned choppy as geopolitical tensions dented travel and event activity. The report notes that the company lost about 9,000 foreign tourist room nights in March alone, leading to an estimated 10% to 12% disruption during that period.

The brokerage expects the situation to improve meaningfully from Q1FY27 onward. A low base from last year, better domestic travel trends, and a likely normalization in international movement could support a stronger FY27, with H2FY27 potentially seeing an acceleration if geopolitical conditions settle. Management has indicated confidence in double-digit room revenue growth in FY27 and mid- to high-single-digit RevPAR growth, while leisure assets are expected to continue improving as newer hotels stabilize.

Expansion Pipeline Looks Valuable

Chalet’s growth story is increasingly about premium additions that can expand both scale and profitability. The company’s portfolio has crossed 5,000 keys, including 3,389 operational keys and 1,644 keys under pipeline as of March 2026. Its latest acquisitions and projects include the 144-key Inder Residency Resort & Spa in Udaipur and a 330-room Ritz Carlton in Hyderabad’s Madhapur micro-market, both of which are aimed at the upper-upscale and ultra-luxury segments.

These assets are strategically attractive because they sit in markets with favorable demand-supply dynamics. Udaipur offers limited upper-upscale supply and strong wedding-driven demand, while Hyderabad’s IT and GCC ecosystem should support corporate, MICE, and high-end leisure demand for the Ritz Carlton project. ICICI Securities believes such properties can command higher ADRs, better occupancy, and stronger RevPAR, thereby improving the company’s premium mix over time. The broker also pointed to the planned Taj Delhi Airport expansion, Hyatt Airoli, Goa, and the continuing buildout of CIGNUS II as additional levers.

Commercial Income Is Scaling Up

The annuity business is emerging as a dependable earnings engine. Chalet’s commercial occupancy remained strong, with Powai around 90% and Bengaluru around 91% in Q4FY26. Monthly rentals were already at about Rs 28 crore, and management expects them to reach roughly Rs 30 crore in FY27. ICICI Securities said CIGNUS II should further lift commercial cash flows from FY28 onward, reinforcing the company’s balanced mix of hospitality and rental income.

What matters here is not just growth, but quality of growth. The annuity segment carries higher margins and lower volatility than hotels, which helps support consolidated profitability even when travel sentiment softens. For investors, that matters because it reduces earnings fragility and improves the visibility of cash generation.

Valuation And Targets

ICICI Securities values Chalet Hotels at Rs 980 using a sum-of-the-parts framework. The target is based on a valuation of the hotel business at 19 times FY28E EV/EBITDA, commercial assets at an 8% capitalization rate, and residential property value, after adjusting for debt and cash. The research house trimmed FY27E and FY28E earnings estimates by 5.4% and 4.2%, respectively, to reflect a more cautious RevPAR assumption in a still-uncertain global backdrop. Even after those cuts, the stock still offers a meaningful gap to the target price.

Investor Takeaway

The stock’s near-term earnings may look uneven, but the medium-term setup remains constructive. Chalet is benefiting from a rare combination of premium hotel expansion, strong commercial leasing, and disciplined capital allocation. The company has also reduced net debt over time despite sizable investment, which suggests management is financing growth in a relatively balanced manner. For investors focused on earnings visibility and a multi-year compounding story, the ICICI Securities Buy call reflects confidence that today’s muted quarter is more a pause than a structural setback.

Level to watch: Rs 795 as the current market price, Rs 980 as the 12-month target, and the implied upside at roughly 23%. The broader thesis is that Chalet’s portfolio quality, premium pipeline, and annuity-led resilience can support a re-rating if demand normalizes and new assets ramp up as planned.