ICICI Securities has initiated coverage on Chalet Hotels, highlighting a potential 15% revenue growth rate through FY29. The brokerage expects a demand recovery in the second half of FY27, driven by domestic and international travel. Investors may note the company's plan to expand its hotel portfolio to over 5,000 keys by 2030.
ICICI Securities has started tracking Chalet Hotels with a positive outlook, setting a price target of INR 1,095. This initiation comes after the company reported a 9% year-on-year increase in hospitality revenue and an 11% rise in EBITDA for the first quarter of fiscal year 2027. While early demand in the April-May 2026 period faced some pressure due to geopolitical factors, the management has observed a shift in trends starting in June 2026.
Hotel Portfolio Expansion Plans
A key focus for the company remains its ambitious capacity expansion. Chalet Hotels intends to add 1,655 keys to its operational hotel portfolio, with the total count expected to surpass 5,000 keys by March 2030. For investors, this represents a significant increase in the company's asset base. The brokerage expects this capacity growth, alongside the company’s leasing business, to be a primary driver of financial performance in the coming years. Projections indicate a compound annual growth rate of 15% for revenue and 20% for EBITDA from FY26 to FY29, excluding the residential segment.
Understanding the Valuation and Risks
The brokerage's target price is based on a sum-of-the-parts valuation method, utilizing a multiple of 22 times the estimated hotel enterprise value to EBITDA for March 2028. While these projections signal long-term potential, investors should be aware of the inherent risks in the hospitality sector. Revenue and profitability are sensitive to global travel trends, geopolitical stability, and domestic economic health. Any delay in the planned hotel expansion or a slower-than-expected recovery in international tourist arrivals could impact these growth projections. Additionally, the hotel industry is highly capital-intensive, and sustained expansion often requires significant debt management. Investors should monitor whether the company can maintain its profit margins while executing this large-scale capacity increase.
Future Monitorables
Moving forward, the primary areas for investors to track include the actual commissioning timeline of the new hotel keys and the stability of average room rates across their portfolio. Quarterly management commentary on travel demand and the progress of the commercial leasing business will also be important indicators of whether the company is meeting its projected growth targets.