ICICI Securities has reiterated its BUY recommendation on Chalet Hotels, setting a target price of Rs 1,058 per share, reflecting an 18% upside from current levels. The brokerage underscores Chalet’s robust growth trajectory, driven by aggressive asset expansion, resilient demand, and a disciplined financial strategy. This report dissects the key drivers, financial metrics, and strategic imperatives shaping Chalet’s investment case, while also highlighting the risks and valuation framework. Investors are advised to monitor the evolving project pipeline and operational performance as the company navigates the next phase of growth.

Summary: Chalet Hotels Poised for Sustained Growth Amid Asset Expansion

Chalet Hotels, a prominent player in India’s hospitality sector, is on the cusp of a transformative growth phase. ICICI Securities maintains a bullish stance, citing the company’s impressive revenue and EBITDA growth, a well-defined pipeline of new assets, and prudent capital allocation. With a projected 17% CAGR in hotel revenue and EBITDA over FY25–27, Chalet is expected to deliver superior returns, supported by a strong balance sheet and expanding annuity rental portfolio. The stock’s current levels present an attractive entry point for investors seeking exposure to India’s burgeoning hospitality market.

ICICI Securities Reaffirms BUY Call with Rs 1,058 Target

ICICI Securities has maintained its BUY rating on Chalet Hotels, setting a target price of Rs 1,058 per share, which implies an 18% upside from the current market price of Rs 900. The valuation is anchored on a sum-of-the-parts (SoTP) approach, factoring in 23x EV/EBITDA for hotels, an 8% cap rate for rental assets, and the residual value of the Vivarea, Bengaluru residential project. The brokerage’s conviction is underpinned by Chalet’s robust earnings visibility and disciplined execution.

Operational Performance: Strong Revenue and EBITDA Growth

Chalet Hotels reported a stellar 18% year-on-year increase in hotel revenue for FY25, reaching Rs 15.2 billion, while EBITDA surged 19% to Rs 6.8 billion. The company’s operational hotel portfolio stands at 3,314 keys across 11 properties, complemented by 2.4 million square feet of annuity rental assets. The EBITDA margin improved to 44.7% in FY25, reflecting operational efficiencies and favorable demand dynamics.

Asset Pipeline: Expansion to Drive Medium-Term Growth

The company’s expansion strategy is on track, with 1,371 new hotel keys expected to be added between FY25 and FY28, taking the total to 4,564 keys by March 2028. Key projects include the Dukes Retreat in Lonavala (150 keys), the Bengaluru Marriott Hotel (121 keys), and the Taj Delhi Airport hotel (390 keys), among others. The annuity rental portfolio is also set to expand, with the Cignus Powai Tower II (0.9 million sq. ft.) scheduled for completion in Q4FY27.

Financial Projections: Sustained Double-Digit Growth

ICICI Securities projects Chalet’s hotel revenue to grow at a 17% CAGR over FY25–27, reaching Rs 20.8 billion in FY27, with hotel EBITDA also rising at a 17% CAGR to Rs 9 billion. The annuity asset portfolio is expected to generate over Rs 3 billion in annual EBITDA upon full stabilization in FY28. At the entity level, revenue and EBITDA CAGRs are forecasted at 17% and 24%, respectively, over FY25–27.

Key Financial Metrics and Valuation Table

Below is a summary of Chalet Hotels’ key financial metrics and valuation parameters:

Stock Levels and Investor Target

Chalet Hotels is currently trading at Rs 900, with a 52-week range of Rs 1,052 to Rs 634. The target price set by ICICI Securities is Rs 1,058, representing an 18% potential upside for investors. The stock’s valuation remains attractive, with forward EV/EBITDA multiples expected to compress as earnings grow.

Operational KPIs: ARR, Occupancy, and RevPAR Trends

Average Room Rates (ARR) grew 13% year-on-year in FY25, with portfolio-level ARR reaching Rs 12,094. Occupancy rates remained stable at 73%, while RevPAR increased 13% to Rs 8,781. The Mumbai Metropolitan Region (MMR) continues to be a key contributor, with strong ADR and RevPAR growth across geographies.

Balance Sheet and Leverage Position

Chalet’s net debt stood at Rs 19.9 billion as of March 2025, down from Rs 25.1 billion in the previous year, aided by a Rs 10 billion QIP in April 2024 and prudent capital management. The company’s net debt-to-equity ratio improved to 0.7x, and debt/EBITDA declined to 3.5x, reflecting enhanced financial flexibility.

ESG Performance: Incremental Improvements

Chalet’s ESG score improved to 75.1 in 2024 from 74.1 in 2023, with notable gains in environmental and governance metrics. The company’s commitment to sustainability and responsible governance is increasingly recognized by stakeholders.

Risks and Watch Points

Key risks include a potential slowdown in hotel demand, delays in project execution, and headwinds in office leasing for annuity assets. Investors should also monitor macroeconomic variables and competitive dynamics in the hospitality sector.

Bottomline for Investors: Chalet Hotels Remains a Compelling Play on India’s Hospitality Upswing

ICICI Securities’ bullish outlook on Chalet Hotels is predicated on the company’s strong operational performance, ambitious expansion plans, and disciplined financial management. With a clear runway for growth and an attractive risk-reward profile, Chalet stands out as a top pick for investors seeking exposure to India’s hospitality renaissance. The stock’s current levels offer a compelling entry point, with the Rs 1,058 target price underscoring significant upside potential for patient investors.