Chalet Hotels down 3% after Q2 earnings miss estimates

The Chalet Hotels stock gave up early gains to fall 3 percent in the morning trade on October 26. The hotel chain reported healthy growth in the September quarter, with the consolidated profit gaining 131.4 percent from the year-ago quarter but still fell short of analysts’ expectations.

Chalet Hotels‘ revenue grew 27 percent year-on-year to Rs 314.5 crore. The EBITDA was up 48 percent on-year to Rs 126 crore and the margin expanded 570 basis points to 40 percent.

One basis point is one-hundredth of a percentage point.

Despite reporting healthy growth, the company was unable to surpass market estimates of revenue of Rs 336 crore, domestic brokerage StoxBox said.

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While it is projected that the foreign tourist arrivals (FTAs) will normalsze to pre-covid levels, the current mix remained significantly lower at 32 percent in H1FY24 compared to 58 percent in H1FY20.

Emkay Global said that the company’s strategically located hotels in key cities ensure high occupancy. Leasing of commercial assets offered partial hedge against cyclicality of the hospitality industry, though asset ownership with high debt level could be a key risk during an industry downtrend.

“Chalet’s new developments and expansion projects are primed to spur its room count by 10 percent pa over FY23-26E. With its properties located in key cities, Chalet would see high occupancy, as: i) these cities also have large office spaces coming up; ii) and have seen lower supply addition in the last six years; these are likely to see a moderate pace of room addition over the next five years,” said Emkay Global.

The brokerage maintained its “hold” rating, with a revised target price of Rs 620 apiece, from Rs 625.

As of 10.38 am, the stock was trading at Rs 547.45 on the NSE, 2.19 percent lower from the previous close.

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