Share price: There has been a lackluster atmosphere among many hospitality stocks in the stock market for some time now. Meanwhile, shares of Chalet Hotels have also disappointed investors this year. Year-to-date (YTD), the stock has lost more than 7 percent. The stock is trading at Rs 834.90 on the National Stock Exchange (NSE). Despite this pressure, leading global brokerage firm Jefferies India has expressed confidence in this stock. Brokerage gave Shell Hotels a ‘buy’ tag and Rs. A target price of 965 has been given. The brokerage believes that the stock can show up to 15 percent upside from current levels.

Big roadmap of the company for the next 5 years

The Jefferies India team met the senior management of Chalet Hotels in Singapore. After this meeting the brokerage presents a positive outlook on the future of the company. According to the brokerage, the growth of the company is expected to be very strong in the next 5 years. The company is planning to increase its room (key) capacity at the rate of 9 to 10 percent annually. Besides, acquisition (M&A) of new projects will also be looked at.

The company wants to establish its brand ‘Athiva’ as a premium hospitality brand across the country, under which a target of adding 1,200 to 1,500 rooms has been set. The company is now focusing on business hotels as well as holiday hotels. The company has a total development pipeline of 2,036 rooms, including approximately 380 rooms recently added in Pune and Hyderabad. Management expects good single digit growth in revenue per available room (RevPAR), which could drive overall revenue growth to around 15 percent.

Strong cash flow from commercial real estate

The hotel business is often vulnerable to fluctuations in demand. In such a situation, the commercial real estate portfolio of Bungalow Hotels is acting as a shield for the company. According to the report, the company from its commercial real estate business generates around Rs. Getting EBITDA of 250 to 300 crores.

This constant cash flow provides stability to the company’s income. This makes it easier for the company to pay off its debt. Apart from this, capital required for expansion of new hotels is also available from here. As a result, the company does not have to depend entirely on the ups and downs of the hotel sector.

Expanding into North India, partnering with big brands

The company no longer wants to be limited to western India, but is also expanding its presence in new areas. Bungalow Hotels has established its presence in Aravali, Himalayas and Udaipur. Along with this, a new Taj Hotel is being built at Delhi Airport, which will start with around 70 rooms in the first phase.

In addition, there are plans to open Athiva Hotel in South Goa in the next 18 to 24 months, with the necessary approvals expected to be received by January 2027. The company is not limited to building new hotels, but is also working on a franchise model. Marriott’s Autograph Collection and its partnership with Indian Hotels Company’s (IHCL) Taj brand reflect the company’s growing credibility.

Investors should keep these things in mind

Although Jefferies predicts a 15 percent gain in the stock, investors have also been warned of some major risks. According to the brokerage, a slowdown in the local or global economy can have a direct impact on the hotel industry.

Apart from this, the travel and tourism business can be affected immediately if a health disaster like an epidemic returns. The third major risk is the company model. Chalet Hotels operates on a 100 percent asset ownership model, meaning the company itself is the sole owner of the property. When there is a downturn in the market, the impact of losses in this model becomes very large.