Whalesbook
Prabhudas Lilladher has reiterated its BUY recommendation for Apeejay Surrendra Park Hotels, setting a target price of Rs 235. The brokerage fine-tuned EPS estimates, noting healthy operating performance driven by RevPAR growth, despite a higher tax rate impacting the bottom line. Growth is expected from new hotel rooms and Flurys outlets, with key hospitality projects advancing.
Prabhudas Lilladher has maintained a BUY recommendation for Apeejay Surrendra Park Hotels, with a target price (TP) of Rs 235. The research report indicates a slight cut in Earnings Per Share (EPS) estimates by approximately 4% for FY27 and FY28. This adjustment is due to revised timelines for opening Flurys outlets and realigned tax rate assumptions.
Despite the EPS revision, the company reported healthy operating performance, with Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) exceeding expectations by 4%. This was primarily driven by double-digit growth in Revenue Per Available Room (RevPAR). However, the company's bottom line was affected by a higher-than-anticipated tax rate of 41.9%, compared to the brokerage's projection of 30%.
Growth drivers for Apeejay Surrendra Park Hotels remain robust. The company now plans to open 30 Flurys outlets in FY26, a slight reduction from the initial target of 40. Significant traction is also visible in the hospitality segment with the successful culmination of the Zillion Hotels acquisition and approval from KMC for a mixed-use project in Kolkata.
The brokerage expects a Compound Annual Growth Rate (CAGR) of 17% in sales over the next three years. This growth is projected to be fueled by the addition of 258 hotel rooms and 120 Flurys outlets. Projected EBITDA margins are expected to be 33.1% in FY26E, 33.5% in FY27E, and 36.3% in FY28E. The BUY rating is maintained with a Sum of the Parts (SoTP) based TP of Rs 235, valuing the hotel business at 15x Sep-27E EBITDA and Flurys at 3x Sep-27E sales, with unchanged target multiples.
Impact
This report is positive for Apeejay Surrendra Park Hotels investors, reiterating confidence in the company's growth prospects and providing a clear valuation benchmark. It may also influence sentiment for other companies in the hospitality and retail F&B sectors.
Rating: 7/10
Difficult Terms:
EPS estimates: Expected Earnings Per Share, which represents a company's profit allocated to each outstanding share of common stock.
EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a measure of a firm's operating performance.
RevPAR: Revenue Per Available Room. A key performance indicator in the hotel industry, calculated by dividing the total revenue generated by all occupied rooms by the total number of rooms available.
CAGR: Compound Annual Growth Rate. The year-over-year growth rate of an investment over a specified period longer than one year.
SoTP: Sum of the Parts. A valuation method that involves adding up the values of a company's individual business units or assets to determine the total value of the company.
EBITDA margin: Calculated by dividing EBITDA by total revenue, it shows the profitability of a company's core operations.
