JM Financial’s coverage initiation and positive outlook on the hospitality sector. It also mentions the brokerage’s preferred stock picks within the sector. Here’s a breakdown of the key details:
- Coverage Initiation and Positive Outlook: JM Financial has initiated coverage on the hospitality sector with a positive outlook. This indicates that the brokerage firm is optimistic about the future performance of companies operating in the hospitality industry.
- Preferred Stock Picks: Within the hospitality sector, JM Financial has identified two companies as its preferred stock picks. These companies are Chalet Hotels and Lemon Tree Hotels. These selections suggest that JM Financial believes these companies have strong potential for growth and favorable prospects within the hospitality industry.
- Factors Influencing Positive Outlook: JM Financial attributes the positive outlook to several factors, including a strong performance in the fiscal year 2022-23 (FY23). Additionally, the brokerage anticipates an upward trajectory in demand due to buoyant domestic demand, the revival of inbound tourism, and the anticipation of future events such as the G-20 summit and the ICC Cricket World Cup.
The revenue composition of the hotel sector and specifically highlights the strategic position and plans of Chalet Hotels. Here’s a breakdown of the key points:
- Revenue Composition:
- Room Rentals: Around 50 percent of aggregate hotel revenue comes from room rentals. This indicates that room occupancy and rates play a significant role in generating revenue for hotels.
- Food and Beverages (F&B): F&B accounts for 40-45 percent of aggregate hotel revenue. This includes revenue from dining services, restaurants, and other food-related offerings.
- Other Services: The remaining 5-10 percent of revenue comes from other services such as spa, in-property retail, laundry, and transport services.
- Chalet Hotels’ Position and Plans:
- Limited Room Supply Benefit: JM Financial believes that Chalet Hotels is well-positioned to benefit from an imminent upcycle in the hotel sector due to limited room supply in specific micro-markets. Limited supply can lead to increased demand for available rooms and potentially higher occupancy rates.
- Expansion Plans: Chalet Hotels has earmarked a capital outlay of Rs 2,000 crore for expansion. The company plans to expand its hospitality portfolio by adding 970 rooms, bringing the total to 3,770 keys by FY26. Additionally, Chalet Hotels aims to expand its annuity portfolio from 1.2 million square feet to 3 million square feet by FY27. This expansion indicates the company’s growth ambitions and strategic focus on increasing its hospitality offerings.
