2 CHALET share price target reports by brokerages below. See what is analyst's view on CHALET share price forecast, rating, estimates, valuation and prediction behind the target. You may use these research report forecasts for long-term to medium term for your investment or trades in 2020.
We expect a sharp fall in the earnings of hospitality companies because of the outbreak of corona virus. The hospitality sector was already facing weaker than expected growth because of slowdown in the economy and weak demand from corporate and MICE segments. The outbreak of corona virus has affected domestic and international travel, acting as yet another headwind for the hospitality sector, which was on the verge of a cyclical upcycle. Our interactions with the industry experts indicate that the ARR and occupancy for January and February 2020 saw a considerable growth on a YoY basis. However, post the implementation of precautionary measures against corona virus like cancellation of tourist visas, imposition of section 144 in certain areas and ultimately announcing a nationwide lockdown from 25th March 2020, the ARR declined sharply and occupancies for March 2020 fell to as low as 5%-10%. The MICE and corporate events were already witnessing subdued demand in the earlier quarters of FY20. The demand was further affected due to cancellations. We expect ARR for 4QFY20 to decline by 15% YoY and occupancies to range between 48% and 60% for Indian Hotels Company Ltd (IHCL), Chalet Hotels Ltd (Chalet) and Lemon Tree Hotels Ltd (LTHL). We have retained Buy rating on IHCL, Chalet and LTHL with TP of Rs127, Rs273 and Rs51, respectively.
Adjusted net profit came in at Rs163mn compared to a loss of Rs227mn in 1QFY19 on the back of reduction in finance costs by 59% YoY due to repayment of debt from IPO proceeds combined with reduction in cost of borrowings. We have valued Chalet Hotels on a SOTP valuation (20x FY21E EV/EBITDA for the Hospitality segment and FY21E NAV based valuation for the rental assets) and arrived at a target price (TP) of Rs395. We maintain BUY.
Our target price of Rs395 is based on SOTP valuation (20x FY21E EV/EBITDA of hospitality segment and FY21E NAV based valuation of rental assets). The company derives 82% of the value from the hospitality segment. This is supported by overall 2 year EBITDA CAGR of 21% over FY19 – FY21E. Our valuation is driven by the cyclical upswing in the hotel sector with an improvement in ARR and occupancies, and increase the commercial and retail assets owned by the company. Higher revenues, together with a relatively muted increase in costs and high operational leverage, are expected to lead to strong growth in EBITDA. Our optimism is further supported by an improvement in the balance sheet.
SOURCE: Data from D'Market via Quandl. Intraday data delayed 15 minutes.
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