Chalet Hotels up 6%, hits 52-week high in a weak market on ratings upgrade

Shares of Chalet Hotels hit a 52-week high at Rs 375.25, as they rallied 6 per cent on the BSE in Monday’s intra-day trade in otherwise weak market. In comparison, the S&P BSE Sensex was down 0.71 per cent at 57,018 at 09:41 am.

In the past one week, the stock of hotel company has surged 14 per cent after the rating agencies revised the Chalet Hotels’ credit rating and the outlook on the long-term issuer rating from ‘negative’ to ‘positive’ and ‘stable’. In comparison, the benchmark index was remained flat during the same period.

Chalet Hotels (CHL) surpassed its previous high of Rs 362.85 touched on September 21, 2022. It had hit a record high of Rs 395 on December 31, 2019. In the past one year, the stock has zoomed 65 per cent, as against 3 per cent decline in the Sesnex.

“The Positive Outlook reflects a consistent recovery in CHL’s business operations since 2QFY22, with 1QFY23 revenue and EBITDA exceeding the pre-COVID-19 levels. The company’s overall revenue was Rs 250 crore and EBITDA was Rs 100 crore in Q1FY23 (Q1FY20: Rs 240 crore and Rs 85 crore),” India Ratings and Research (Ind-Ra) said in rating rationale on September 28.

The agency expects the company’s business momentum to continue with the resumption of the full-scale international travel, which is likely to boost CHL’s earnings and in turn, lead to steady deleveraging over FY23-FY24. The company is also likely to benefit from its enhanced business diversification with high-margin and stable commercial segment accounting for 35% of revenue from the current 10 per cent. Moreover, the company benefits from the group’s financial flexibility with need-based support. Any travel restriction due to new COVID-19 waves remains key risk, Ind-Ra said.

The revision in rating outlook to 'Stable' factors in the healthy improvement in the operating performance of the CHL’s hospitality portfolio in Q1 FY2023 and expectations of sustained recovery over the near to medium term, ICRA said in rating rational on September 29.

This, along with steady rentals from the commercial real estate segment, would support the company’s cash flows going forward. The ratings remain supported by CHL being a part of the K Raheja Corp (CL Raheja) Group which is an established name in hospitality, commercial and residential real estate businesses; the company’s diverse business mix comprising hospitality, commercial and retail assets; and CHL’s management tie-up with Marriott International Inc. and Accor Hotels, and the associated benefits from their extensive branding, marketing and advertising networks, the rating agency said.

CHL is primarily engaged in the business of hospitality (hotels), rental and annuity business (formerly known as commercial and retail operations) and real estate development.