Chalet Hotels’ leisure momentum and commercial rentals support expansion-led growth

Investment View and Valuation

In its November 6, 2026 result update, Axis Securities maintained its BUY recommendation on Chalet Hotels Ltd with an unchanged target price of Rs 1,000 per share. The broker believes Chalet is positioned to benefit from India’s structural hospitality upcycle through revenue growth, improving margins, higher annuity income and a strong leisure portfolio.

The target price implies 22 per cent upside from the CMP of Rs 823. Axis Securities has retained its FY27E and FY28E sales, EBITDA and PAT estimates without change. The broker values Chalet Hotels at 16.5 times FY28E EV/EBITDA.

Q2FY27 Financial Performance

Chalet Hotels reported Q2FY27 core revenue, excluding residential revenue, of Rs 511 crore, up 11 per cent YoY. Hospitality revenue rose 8 per cent YoY to Rs 412 crore, supported by 11 per cent YoY ARR growth to Rs 13,546. However, occupancy fell 244 bps YoY to 64 per cent.

Core EBITDA was Rs 227 crore, with the margin expanding 110 bps YoY to 45 per cent. Hospitality EBITDA margin was 41 per cent, while commercial EBITDA margin was 83 per cent. PAT rose 40 per cent YoY to Rs 216 crore, aided significantly by a Rs 113 crore one-time deferred-tax credit following the transition to a concessional tax regime.

Operating Performance and Hospitality Outlook

Axis Securities noted mixed operating performance across business hotels. MMR growth was subdued because of construction activity and heavy July rainfall. Pune saw healthy corporate and retail-led growth, Hyderabad achieved strong RevPAR growth on GCC demand, and Bengaluru reported moderate growth.

The leisure resort portfolio was the standout, with RevPAR growth of 33.8 per cent. This was led by a 50 to 55 per cent rebound at The Westin Resort & Spa, Himalayas and stabilisation at Athiva Resort & Spa, Khandala.

Management expects the porch reopening at Powai to restore large MICE events and daily airline crew contracts, supporting a recovery from Q3FY27. It also expects weakness in international corporate and GCC travel to stabilise after the US elections and easing West Asia tensions. Domestic MICE and weddings remain robust for Q3FY27 and H2FY27.

Commercial Real Estate and Expansion Pipeline

The commercial real-estate business remains an important annuity driver. Commercial revenue increased 22 per cent YoY to Rs 90 crore in Q2FY27. The operating office portfolio was 91 per cent occupied, while the monthly rental exit run rate reached Rs 30 crore in September 2026.

Cygnus Tower II at Powai is expected to add 0.9 million sq. ft. of leasable area on substantial completion by FY27-end. Chalet plans capital expenditure of Rs 3,400 crore to Rs 3,600 crore over FY27 to FY29, largely funded by internal accruals.

Other pipeline milestones include the 380-key Taj hotel at Delhi International Airport, with 70 keys targeted for partial launch in Q4FY27 and full completion expected in early FY28. The company also plans to expand the Athiva brand and is considering a potential 144-key premium resort in Udaipur.

Earnings Forecasts

Key Risks

• An economic slowdown affecting travel demand.
• Additional hotel supply reducing realisations.
• Negative operating leverage limiting EBITDA-margin sustainability.
• Delays in commissioning projects.