SAMHI Hotels, 2 more stocks set to sizzle this summer with up to 36% likely upside, says Kotak Equities

The strength in average per room (ARR) gives improved visibility for FY2025E, leading to an upward revision of 2-5% in ARRs across coverage companies, Kotak said in a note. This implies an up to 6% revision in FY2025E .

Of the 55,000 incremental branded keys expected for the industry over FY2023-28E, India saw 9,000 keys getting added in February. The new is expected to come at a measured pace, Kotak said.

SAMHI Hotels: BUY | Old TP: 250 | New TP: 270 | Upside: 36%

The stock was recommended at a price of Rs 199, which translates into a 36% upside. SAMHI Hotels has seen a consistent improvement in its earnings, aided by industry tailwinds as well as reduction post the issuance in September 2023. The company has a pipeline of 600 keys although the revocation of the leasehold land in Navi Mumbai, which was to house a 350-key Fairfield by Marriott could alter the growth prospects, it said.

While the management believes it has a strong legal recourse to re-assume land possession, in the eventual scenario that it is unable to validate the lease, the financial impact of Rs 86.8 crore has been written-off with potential recoveries of Rs 10 crore, the brokerage said.

Chalet Hotels: ADD | Old TP: 790 | New TP: 900 | Upside: 6.7%

The target has been raised on multiple triggers. Kotak has revised our EBITDA estimates by 6% for FY2025E and 7% for FY2026E, premising a higher room rates for the premium hotels, infusion of Rs 1,000 crore and acquisition of a 158-key in the NCR.

Chalet is among the fastest growing hospitality companies in India, with multiple levers for growth, which include, room rate improvement, addition of new keys, as well as the addition of new office space. The company is expected to deliver the highest EBITDA CAGR of 41% over FY2024-26E within Kotak's coverage.

For 9MFY24, the hotel clocked an ARR of Rs 13,500/ day at an occupancy of 44%. The inclusion of the new hotel, as well as the revision in ARR for FY2025/26E, has led to a 6%/ 7% increase in our EBITDA estimate for FY2025/26E.

IHCL: ADD | Old TP: 535 | New TP: 620 |Upside: 6%

Indian Hotels' EBITDA estimates have been revised by 6% for FY2025E and 10% for FY2026E higher room rates for the premium hotels and lower operating costs as reflected in the business performance for 9MFY24. IHCL has a healthy pipeline of 11,000 new keys.

For IHCL. relatively lower ARR growth for the blended is seen along with the economy/ mid-tier segment in comparison to the premium/ luxury segment.

Lemon Tree: REDUCE | Old TP: 122 | New TP: 130 | Downside: 5.3%

EBITDA estimates for Lemon Tree are revised by 2%/4% for FY 2025/26, which is lower than its peers. A tad lower ARR growth for mid-tier hotels is expected with limited scope for ARR improvement at its Mumbai property Aurika.

Lemon Tree has grown its portfolio rapidly, crossing 10,000 keys which includes 5,750 owned/leased keys with the balance being managed/franchised keys.

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