Despite the remarkable profit growth, the quarter-on-quarter momentum tells a different story. Net profit surged 434.90% from Q1 FY26's ₹17.28 crores, driven primarily by exceptional other income of ₹15.09 crores in the previous quarter that normalised to ₹3.36 crores in Q2. Revenue growth remained healthy at 7.63% QoQ and 11.77% YoY to ₹292.97 crores, whilst operating margins expanded to 36.57% from 33.25%, reflecting improved operational efficiency.
The hospitality sector has witnessed robust recovery post-pandemic, with Samhi Hotels capitalising on increased travel demand and premium positioning across its portfolio. The company operates as one of India's leading hotel owners and asset managers, managing properties across key metropolitan and leisure destinations. The zero-promoter holding structure, with 45.87% institutional ownership dominated by foreign institutional investors, reflects professional management but also raises questions about long-term strategic direction.
| Quarter | Sep'25 | Jun'25 | Mar'25 | Dec'24 | Sep'24 |
|---|---|---|---|---|---|
| Revenue (₹ Cr) | 292.97 | 272.21 | 318.81 | 295.77 | 262.13 |
| QoQ Change | +7.63% | -14.62% | +7.79% | +12.83% | +4.90% |
| Net Profit (₹ Cr) | 92.43 | 17.28 | 45.87 | 22.79 | 12.62 |
| YoY Change | +632.41% | +308.51% | +306.29% | — | — |
| Operating Margin | 36.57% | 33.25% | 38.11% | 37.29% | 35.09% |
| PAT Margin | 34.96% | 8.10% | 14.39% | 7.71% | 5.38% |
Financial Performance: Strong Topline, Margin Expansion
Samhi Hotels' Q2 FY26 revenue of ₹292.97 crores represented robust growth momentum, with year-on-year expansion of 11.77% and sequential improvement of 7.63% from Q1 FY26's ₹272.21 crores. The company's revenue trajectory over recent quarters demonstrates consistent growth, though seasonal variations remain evident with Q4 FY25's ₹318.81 crores representing a peak period.
Operating profit excluding other income surged to ₹107.13 crores, yielding a healthy 36.57% margin—the highest in recent quarters. This marked a significant improvement from Q1 FY26's 33.25% and Q4 FY25's 38.11%. The margin expansion reflects improved operational efficiency, better pricing power, and optimised cost management. Employee costs remained well-controlled at ₹48.96 crores, representing 16.71% of revenue, marginally higher than the previous quarter's 17.14%.
However, the profit before tax of ₹122.33 crores requires careful analysis. The figure includes ₹3.36 crores of other income in Q2 FY26, substantially lower than Q1 FY26's exceptional ₹15.09 crores. Stripping out this volatility, the underlying operational performance shows steady improvement. Interest costs declined to ₹42.70 crores from ₹50.62 crores quarter-on-quarter, reflecting deleveraging efforts, whilst depreciation remained stable at ₹29.61 crores.
The quality of earnings warrants scrutiny. The PAT margin of 34.96% in Q2 FY26 appears exceptionally strong but includes the benefit of a favourable tax rate of 16.28%, compared to the previous quarter's 14.94%. The effective tax rate has been volatile across quarters, with Q4 FY25 recording a negative rate of -103.32%, suggesting prior period adjustments or deferred tax reversals.
Capital Efficiency: Weak Returns Despite Growth
Despite impressive profit growth, Samhi Hotels' return on capital employed (ROCE) of 8.71% and return on equity (ROE) of 9.19% remain significantly below industry standards for quality hospitality businesses. These modest returns reflect the capital-intensive nature of hotel ownership, high debt burden, and the company's relatively early stage in its recovery trajectory from pandemic-induced losses.
The balance sheet reveals a shareholder equity base of ₹1,142.05 crores as of March 2025, supporting fixed assets of ₹2,906.02 crores. Long-term debt stood at ₹1,963.34 crores, resulting in a debt-to-equity ratio of 1.91—amongst the highest in the peer group. Whilst the company generated robust operating cash flow of ₹357.04 crores in FY25, the highest on record, debt servicing remains a significant drag on profitability with interest costs of ₹228.00 crores annually.
⚠️ Capital Structure Concerns
Samhi Hotels' debt-to-EBITDA ratio of 7.81 times and net debt-to-equity of 1.91 represent substantial financial leverage. Whilst operating cash flows have strengthened, the company's ability to generate attractive returns on capital remains constrained by high interest burden. The average EBIT-to-interest coverage of just 0.74 times indicates earnings barely cover interest obligations, leaving limited room for error in a cyclical industry.
Industry Context: Premium Positioning in Recovery Phase
The Indian hospitality sector has witnessed robust recovery with occupancy rates and average room rates (ARRs) surpassing pre-pandemic levels across major markets. Samhi Hotels, with its focus on premium and upscale segments through partnerships with international brands, has benefited from this trend. The company's asset-light management model combined with strategic ownership positions it to capture upside from the ongoing travel boom.
However, the sector faces headwinds from new supply additions, particularly in metropolitan markets, which could pressure pricing power. Additionally, the company's revenue concentration in specific geographies and property types creates cyclical vulnerability. The absence of promoter holding, whilst reflecting professional governance, also means limited strategic capital availability for opportunistic acquisitions during market downturns.
| Company | Market Cap (₹ Cr) | P/E Ratio | P/BV Ratio | ROE (%) | Debt/Equity |
|---|---|---|---|---|---|
| Samhi Hotels | 4,615 | 38.22 | 4.03 | 9.19 | 1.91 |
| Lemon Tree Hotels | — | 60.70 | 11.22 | 9.13 | 1.36 |
| Mahindra Holidays | — | 52.20 | 8.66 | 19.01 | 2.73 |
| ITDC | — | 65.40 | 14.39 | 12.16 | -0.60 |
| Juniper Hotels | — | 78.05 | 2.21 | 1.76 | 0.53 |
Peer Comparison: Valuation Discount Reflects Quality Gap
Samhi Hotels trades at a P/E ratio of 38.22 times, representing a discount to the broader peer group average of approximately 60-70 times. However, this apparent valuation discount is justified by the company's inferior return profile. With an ROE of 9.19%, Samhi significantly underperforms peers like Mahindra Holidays (19.01% ROE) and ITDC (12.16% ROE), though it matches Lemon Tree Hotels (9.13% ROE).
The price-to-book ratio of 4.03 times appears reasonable compared to Lemon Tree's 11.22 times and ITDC's 14.39 times, reflecting the market's recognition of Samhi's asset-heavy model and modest profitability. The company's debt-to-equity ratio of 1.91 sits between Lemon Tree's 1.36 and Mahindra Holidays' 2.73, indicating moderate leverage within the sector context.
Critically, Samhi Hotels' market capitalisation of ₹4,615 crores positions it as the sixth-largest player in the peer group, limiting institutional interest and trading liquidity. The company's enterprise value-to-EBITDA multiple of 16.36 times and EV-to-sales of 5.88 times suggest premium pricing relative to asset quality, particularly given the weak ROCE of 8.71%.
Valuation Analysis: Expensive Despite Recent Correction
Trading at ₹208.65, Samhi Hotels commands an "Expensive" valuation grade, having oscillated between "Very Expensive" and "Expensive" over recent months. The stock's 18.05% decline from its 52-week high of ₹254.60 has improved relative valuation, but fundamentals do not support aggressive accumulation at current levels.
The P/E ratio of 38.22 times appears elevated for a business generating sub-10% returns on equity. Historical context reveals the company turned profitable only in FY25 after years of losses, with FY24 recording a net loss of ₹234.00 crores and FY23 showing a loss of ₹338.00 crores. The recent profitability surge stems primarily from operational recovery rather than structural business transformation.
The PEG ratio of 0.15 appears attractive superficially, suggesting the stock trades below its growth rate. However, this metric proves misleading given the low base effect—growing from losses to modest profits naturally generates high percentage growth rates that are unlikely to sustain. The five-year sales CAGR of 23.10% and EBIT growth of 48.63% reflect recovery from pandemic lows rather than structural competitive advantages.
"Whilst Samhi Hotels has delivered impressive profit growth, the combination of weak returns on capital, high leverage, and expensive valuation creates an unfavourable risk-reward equation for investors at current levels."
Shareholding Pattern: FII Exodus Signals Caution
The shareholding pattern reveals concerning trends. Foreign institutional investors have consistently reduced their stake from 58.37% in September 2024 to 45.87% in September 2025, representing a cumulative decline of 12.50 percentage points. The most recent quarter alone witnessed a 1.60% reduction from 47.47% to 45.87%, suggesting waning institutional confidence.
| Category | Sep'25 | Jun'25 | Mar'25 | QoQ Change |
|---|---|---|---|---|
| Promoter | 0.00% | 0.00% | 0.00% | — |
| FII | 45.87% | 47.47% | 51.94% | -1.60% |
| Mutual Funds | 12.05% | 10.78% | 10.21% | +1.27% |
| Insurance | 0.20% | 0.14% | 0.02% | +0.06% |
| Other DII | 4.23% | 4.14% | 3.74% | +0.09% |
| Non-Institutional | 37.65% | 37.48% | 34.09% | +0.17% |
Partial offset comes from domestic mutual funds, which increased holdings from 10.78% to 12.05% quarter-on-quarter, and non-institutional investors, whose stake rose from 34.09% in March 2025 to 37.65% currently. However, the sustained FII selling pressure—across four consecutive quarters—indicates sophisticated investors are taking profits or reassessing the investment case despite strong quarterly results.
The zero-promoter holding structure, whilst common for professionally managed hotel platforms, creates governance questions regarding long-term strategic vision and capital allocation priorities. With 86 foreign institutional investors and 11 mutual funds holding stakes, the shareholder base appears fragmented, potentially limiting strategic flexibility.
Stock Performance: Underperformance Despite Strong Results
Samhi Hotels' stock has delivered a one-year return of 15.66%, outperforming the Sensex's 5.35% by 10.31 percentage points. However, this outperformance narrows significantly over shorter timeframes. The three-month return of -8.61% badly trails the Sensex's 4.10% gain, generating negative alpha of -12.71%. Year-to-date returns of 3.78% lag the benchmark's 8.36%, creating a negative alpha of -4.58%.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | 3.24% | 0.29% | +2.95% |
| 1 Month | 5.99% | 5.36% | +0.63% |
| 3 Months | -8.61% | 4.10% | -12.71% |
| 6 Months | 14.23% | 5.46% | +8.77% |
| Year-to-Date | 3.78% | 8.36% | -4.58% |
| 1 Year | 15.66% | 5.35% | +10.31% |
| 2 Years | 37.72% | 32.75% | +4.97% |
The stock's beta of 1.35 indicates high volatility relative to the market, with annualised volatility of 41.33% compared to the Sensex's 12.49%. This elevated risk profile, combined with modest risk-adjusted returns (Sharpe ratio of 0.38 versus Sensex's 0.43), suggests investors are not being adequately compensated for the volatility they bear.
Technical indicators present a mixed picture. The stock recently shifted to a "Mildly Bullish" trend on October 27, 2025, at ₹198.75, after oscillating between sideways and mildly bullish patterns. However, the stock trades below all key moving averages—5-day (₹200.65), 20-day (₹197.99), 50-day (₹205.41), 100-day (₹215.40), and 200-day (₹192.32)—indicating weak momentum and lack of conviction amongst buyers.
Investment Thesis: Below-Average Quality Limits Upside
Samhi Hotels' investment case rests on four key pillars, with the proprietary Mojo assessment revealing significant weaknesses. The near-term financial trend scores "Positive," supported by record operating cash flow and improving profitability. Technical indicators show "Mildly Bullish" momentum, though the recent trend change lacks confirmation from volume or moving average support.
However, the quality assessment of "Below Average" significantly undermines the bull case. The company's five-year average ROCE of 6.33% and ROE of 9.19% rank amongst the weakest in the hospitality sector. The debt-to-EBITDA ratio of 7.81 times and EBIT-to-interest coverage of just 0.74 times highlight financial fragility. These structural weaknesses persist despite impressive recent profit growth.
Valuation remains "Expensive" at current levels, with the stock trading at 38.22 times earnings and 4.03 times book value. Whilst these multiples appear reasonable relative to loss-making history, they prove demanding given the weak return profile. The overall Mojo score of 34 out of 100 generates a "SELL" rating, reflecting the unfavourable combination of expensive valuation, below-average quality, and execution risks.
Key Strengths & Risk Factors
✅ KEY STRENGTHS
- Robust Revenue Growth: Five-year sales CAGR of 23.10% demonstrates strong market positioning and recovery momentum
- Margin Expansion: Operating margins improved to 36.57% in Q2 FY26, reflecting operational efficiency gains
- Strong Cash Generation: Operating cash flow of ₹357.04 crores in FY25 represents highest-ever performance
- Professional Management: Zero-promoter structure with 62.35% institutional holdings ensures governance standards
- Asset Portfolio: Fixed assets of ₹2,906.02 crores provide substantial tangible backing
- Sector Tailwinds: Indian hospitality recovery and premium segment strength support growth
⚠️ KEY CONCERNS
- Weak Capital Returns: ROCE of 8.71% and ROE of 9.19% significantly below quality thresholds
- High Leverage: Debt-to-equity of 1.91 and debt-to-EBITDA of 7.81 times create financial vulnerability
- Interest Burden: EBIT-to-interest coverage of 0.74 times indicates earnings barely cover debt servicing
- FII Exodus: Sustained foreign institutional selling from 58.37% to 45.87% over four quarters
- Expensive Valuation: P/E of 38.22 times appears demanding given quality concerns
- High Volatility: Beta of 1.35 and volatility of 41.33% create risk without commensurate returns
- Loss-Making History: Recently turned profitable after years of substantial losses
Outlook: What to Watch
📈 POSITIVE CATALYSTS
- Deleveraging Progress: Monitor quarterly debt reduction and interest cost trends
- ROCE Improvement: Track return on capital trajectory toward 12-15% threshold
- Sustained Margin Gains: Operating margins sustaining above 36% would signal pricing power
- Domestic Institutional Buying: Continued mutual fund accumulation could offset FII selling
- Cash Flow Consistency: Maintaining operating cash flow above ₹350 crores annually
🚩 RED FLAGS
- Continued FII Selling: Further reduction below 40% would signal institutional abandonment
- Margin Compression: Operating margins falling below 33% would indicate competitive pressure
- Rising Interest Costs: Any increase in debt servicing burden given tight coverage ratios
- Revenue Stagnation: Quarterly revenue growth falling below 5% YoY
- Working Capital Deterioration: Negative cash flow from operations in any quarter
The Verdict: Attractive Growth Undermined by Structural Weaknesses
Score: 34/100
For Fresh Investors: Avoid initiating positions at current levels. Despite impressive quarterly profit growth of 632% year-on-year, the combination of weak return on capital (ROCE: 8.71%, ROE: 9.19%), high leverage (debt-to-equity: 1.91), and expensive valuation (P/E: 38.22x) creates an unfavourable risk-reward equation. The sustained foreign institutional selling and stock's 18% decline from 52-week highs reflect justified concerns about sustainability of the profit surge.
For Existing Holders: Consider reducing exposure on any price strength toward ₹220-230 levels. Whilst the company has delivered strong operational performance, structural issues around capital efficiency and financial leverage limit upside potential. The "Below Average" quality grade and "Expensive" valuation suggest limited margin of safety. Maintain strict stop-loss discipline and reassess if ROCE improves above 12% or debt-to-EBITDA falls below 5 times.
Fair Value Estimate: ₹165-180 (18-24% downside from current levels of ₹208.65), based on normalised earnings power, peer P/E of 30-32 times adjusted for quality discount, and book value of ₹51.63 with 3.0-3.5x multiple for asset-heavy hospitality business.
