The Leela's premiumisation and event-led demand support stronger earnings and valuation
Leela Palaces Hotels & Resorts Ltd.
BUY
₹590
₹596.2
₹720
22.03%
Investment View and Target Price
Choice Institutional Equities upgraded its view on The Leela, the hospitality business of Schloss Bangalore Limited, to BUY on October 15, 2026, after two quarters of consistent outperformance in a weak macro environment. The broker raised its target price to Rs 720 per share from Rs 540, citing sustained pricing strength, premiumisation momentum, event-led demand and expectations of a stronger H2FY27.
Q2FY27 Financial Performance
The Leela reported strong Q2FY27 operating performance, with revenue and profit exceeding Choice Institutional Equities' estimates. EBITDA margin was modestly below the broker's estimate, while PAT margin was ahead of expectations.
| Metric | Q2FY27 | Year-on-year change | Versus estimate |
|---|---|---|---|
| Revenue | Rs 4,119 million | Up 32.6% | 10.8% above estimate of Rs 3,718 million |
| EBITDA | Rs 1,877 million | Up 36.1% | 9.1% above estimate |
| EBITDA margin | 45.6% | — | 72 basis points below estimate of 46.3% |
| Profit after tax | Rs 946 million | — | 15.8% above estimate |
| PAT margin | 23.0% | — | Above estimated 22.0% |
Operating Performance and RevPAR Trends
Owned-hotel RevPAR rose about 30% year on year to Rs 17,255 in Q2FY27. The increase was fully driven by a 30% rise in ARR to Rs 25,046, while occupancy remained unchanged year on year at 69%. The BRICS Summit in Delhi and a shift towards premium room categories supported pricing. Suite occupancy increased by more than 700 basis points year on year.
| Segment / period | RevPAR | Year-on-year change | Occupancy / other detail |
|---|---|---|---|
| Owned hotels, Q2FY27 | Rs 17,255 | Up about 30% | Occupancy unchanged at 69%; ARR up 30% to Rs 25,046 |
| City hotels, H1FY27 | Rs 15,948 | Up 26% | Occupancy improved to 74%; principal growth engine |
| Resorts, H1FY27 | Rs 14,722 | Up 18% | Coorg ramp-up weighed on occupancy; ex-Coorg occupancy close to 60% |
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Demand Outlook and Operating Drivers
Management said domestic revenue grew more than 30% year on year, supported by corporate, leisure, MICE and event demand. It expects high-teens RevPAR growth in Q3FY27 and mid-to-high-teens EBITDA growth in H2FY27.
Management expects resort occupancy to rise from the current 50% range towards 60%, with scope to reach the high-60% range over the next few years. RevPAR grew 17% year on year against 13% for the luxury industry, and the RevPAR index improved from 1.41 times to 1.46 times. NPS was 87 in H1FY27.
- Food and beverage revenue grew 21% year on year.
- Management fees increased 76% to Rs 289 million, supported by the ramp-up of managed hotels.
- Brand website contribution to room revenue rose to 15.1% in H1FY27 from 10.5% in H1FY26, improving distribution economics.
- Coorg reached EBITDA breakeven, while its ADR doubled from the pre-acquisition level.
Development Pipeline
The Leela had 1,038 keys under development across 10 properties, with openings planned through CY30E.
- Jaisalmer and Mumbai luxury residences are expected by FY27-end.
- Srinagar and Bandhavgarh are expected by CY27-end.
- Four properties are planned for CY28E.
- Dubai handover is expected around April 2027, followed by about 12 months of renovation.
- BKC completion is expected by CY30E.
Earnings Estimates and Growth Forecasts
Choice Institutional Equities raised its estimates for FY27E and FY28E as follows:
| Period | Revenue estimate | EBITDA estimate | PAT estimate |
|---|---|---|---|
| FY27E revision | Increased by 5.6% | Increased by 6.0% | Increased by 10.8% |
| FY28E revision | Increased by 14.9% | Increased by 17.5% | Increased by 14.1% |
The broker forecasts FY26 to FY29E revenue CAGR of 21.1%, adjusted EBITDA CAGR of 22.3% and PAT CAGR of 28.8%. Adjusted EBITDA margin is expected to improve from 47.2% in FY26 to 49.2% in FY29E.
Valuation
The target price is based on 22.0 times FY28E EV to adjusted EBITDA, increased from 18.0 times because of ARR outperformance and brand value. The resulting equity value is Rs 720 per share. A DCF valuation of Rs 700 per share provides a cross-check.
Key Monitorables and Risks
- Direct pledge of about 73.6% of promoter shareholding as of June 2026.
- Stabilisation of Coorg occupancy.
- Timely execution of the development pipeline.
- Near-term weakness in Dubai property transaction volumes.
Disclaimer: This is a summary of a research report published by the broker/research house identified above. The views, recommendations, target prices and estimates are those of the respective broker and do not represent DSIJ investment advice. The summary may be AI-assisted, hence please refer to the original report for complete details, disclosures and risks.
