Chalet Hotels sees H2FY27 recovery as Taj Delhi and CIGNUS-II drive FY28 growth

Investment View and Target Price

Anand Rathi Research's July 30, 2026 result update maintains a BUY rating on Chalet Hotels and raises the target price to Rs 1,250 from Rs 1,120. The current market price is Rs 800. The broker views Q1 FY27 as an in-line operating quarter and expects a strong recovery from H2 FY27.

The investment case is supported by Chalet Hotels' expanding hospitality portfolio, growing commercial annuity income, margin improvement and the expected contribution from the Taj Delhi property and CIGNUS Tower II from Q1 FY28.

Q1 FY27 Financial Performance

Consolidated revenue excluding residential project income was about Rs 5,140 million, up 9.5 per cent year on year and in line with Anand Rathi's and Street estimates. Reported consolidated revenue including residential income was Rs 5,213 million, down 42.6 per cent year on year, as Q1 FY26 included sales of 95 residential units compared with only one unit in Q1 FY27.

EBITDA excluding residential income was about Rs 2,400 million, up 15.2 per cent year on year, with a 46.7 per cent margin. The margin exceeded Anand Rathi's and Street expectations by 469 and 345 basis points, respectively.

Hospitality Operations

Hospitality revenue rose 8.5 per cent year on year to about Rs 4,185 million, driven by an 8.5 per cent increase in average daily rate to Rs 13,247. Combined occupancy declined 120 basis points to 64.8 per cent, as foreign tourist arrivals remained soft amid the West Asia crisis. Foreign tourists account for about 35-40 per cent of the business.

Leisure performance was stronger, with RevPAR increasing about 19 per cent year on year on both rate and occupancy. Combined RevPAR rose 6.5 per cent to Rs 8,582, while the hospitality EBITDA margin improved 92 basis points year on year to 42.6 per cent.

Commercial Annuity Business

The annuity business remained a key positive. Q1 FY27 revenue increased 18.2 per cent year on year to Rs 865 million and EBITDA grew 20.9 per cent to Rs 735 million, lifting the EBITDA margin to 85 per cent from 83.1 per cent.

Occupancy reached about 91 per cent compared with about 77 per cent in Q1 FY26, while leased area increased to about 2.1 million square feet from 1.8 million square feet. Management expects monthly exit rentals of Rs 300-320 million in FY27, versus about Rs 288 million currently, aided by better occupancy at CIGNUS Tower I and Whitefield.

CIGNUS Tower II in Powai, with 0.9 million square feet of leasable area, is expected to become operational by Q4 FY27E. Anand Rathi forecasts annuity revenue and EBITDA CAGRs of 23.2 per cent and 24.6 per cent, respectively, over FY26-FY28E.

Portfolio Expansion and Growth Outlook

Chalet Hotels had about 5,044 keys as of Q1 FY27, comprising 3,389 operational keys and about 1,655 keys in the pipeline. The Taj Delhi International Airport property is expected to be fully operational by Q1 FY28, with 380 rooms and potential revenue of about Rs 2,000 million based on 70 per cent occupancy and Rs 16,000 ADR.

The broker expects hospitality revenue to grow at a 16.5 per cent CAGR over FY26-FY28E. It forecasts overall revenue growth of about 10 per cent in FY27E and 23.4 per cent in FY28E, as Taj Delhi and CIGNUS Tower II begin contributing.

Management Outlook and Capital Expenditure

Management has guided for capex of about Rs 30,000 million over FY27-FY29E across hospitality and commercial real estate. The investment is expected to be largely funded by internal accruals and support the addition of more than 500 keys annually.

Management expects foreign tourist arrivals to normalise about 60 days after the West Asia conflict nears resolution. It expects MMR occupancy to recover towards about 77 per cent over the medium term, supported by Bengaluru stabilisation, completion of Powai and Vashi construction, and resort ramp-up towards more than 70 per cent group occupancy.

Valuation Framework

Anand Rathi values the hospitality segment at 20 times FY28E EBITDA and the commercial annuity income at a 10 per cent capitalisation rate. The broker separately assigns NAV to the Koramangala residential business.

Key Risks

• Weak demand resulting from an economic slowdown.
• Lower-than-expected project execution.
• External factors affecting operating performance.
• Concentration risk, as MMR contributes about 50 per cent of hospitality revenue.