Financial Performance Overview
Chalet Hotels reported a notably positive quarter in Q2 FY25-26, with net sales reaching ₹735.31 crores, reflecting a 30.6% increase compared to the previous four-quarter average. Operating profit also demonstrated robust growth at 25.61%, contributing to a healthy upward trajectory in earnings. The company’s profit after tax (PAT) for the quarter stood at ₹154.84 crores, marking a 117.3% rise relative to the preceding four quarters. Additionally, profit before tax excluding other income (PBT less OI) was ₹196.44 crores, up by 34.7% over the same period.
Over the longer term, Chalet Hotels has shown substantial growth, with net sales expanding at an annual rate of 33.43% and operating profit increasing by 77.21%. These figures underscore the company’s ability to generate revenue and earnings growth consistently over multiple quarters.
Valuation and Profitability Metrics
Despite the encouraging top-line and bottom-line growth, the company’s profitability ratios present a more nuanced picture. The average Return on Capital Employed (ROCE) is recorded at 7.52%, indicating modest profitability relative to the total capital invested, including both equity and debt. Similarly, the average Return on Equity (ROE) stands at 7.00%, suggesting limited returns generated on shareholders’ funds.
From a valuation standpoint, Chalet Hotels is trading with an enterprise value to capital employed ratio of 3.7, which is considered relatively expensive when compared to its historical peer averages. The company’s price-to-earnings growth (PEG) ratio is notably low at 0.1, reflecting the significant profit growth juxtaposed with the current market price. However, the stock price has declined by 13.36% over the past year, underperforming the broader market indices such as the BSE500, which posted a 1.56% return during the same period.
Debt and Management Efficiency Concerns
One of the critical factors influencing the recent revision in Chalet Hotels’ evaluation is its debt servicing capability. The company’s Debt to EBITDA ratio is elevated at 16.02 times, signalling a high level of leverage relative to earnings before interest, taxes, depreciation, and amortisation. This ratio suggests potential challenges in managing debt obligations efficiently.
Additionally, promoter shareholding dynamics add to the cautious outlook. Approximately 31.93% of promoter shares are pledged, which may exert downward pressure on the stock price, particularly in volatile or declining market conditions.
Technical Analysis and Market Trends
Technical indicators for Chalet Hotels reveal a shift in market sentiment. Weekly and monthly Moving Average Convergence Divergence (MACD) readings are bearish or mildly bearish, indicating a subdued momentum in price movements. The Relative Strength Index (RSI) on a weekly basis shows bullish tendencies, but the monthly RSI does not signal a clear trend. Bollinger Bands suggest bearish conditions on the weekly chart, while the monthly chart remains sideways.
Other technical tools such as the Know Sure Thing (KST) indicator and Dow Theory also reflect mildly bearish trends on weekly and monthly timeframes. The On-Balance Volume (OBV) indicator shows no significant trend weekly but mildly bearish signals monthly. Daily moving averages present mildly bullish signals, suggesting some short-term support despite the broader technical caution.
Price action over the past week and month further illustrates this mixed technical picture. Chalet Hotels’ stock price declined by 1.66% over the last week, contrasting with a 0.20% gain in the Sensex. Over the past month, the stock’s return was marginally negative at -0.19%, while the Sensex recorded a -0.46% return. Year-to-date, the stock has generated a negative return of -11.51%, whereas the Sensex posted an 8.22% gain.
From struggle to strength! This Small Cap from Textile - Machinery is showing early turnaround signals that look promising. Position yourself now for explosive growth potential ahead!
- - Early turnaround signals
- - Explosive growth potential
- - Textile - Machinery recovery play
Position for Explosive Growth →
Long-Term Returns and Market Comparison
Examining Chalet Hotels’ performance over extended periods reveals a more favourable trend. The stock has delivered a cumulative return of 145.27% over three years, significantly outpacing the Sensex’s 37.86% return during the same timeframe. Over five years, the stock’s return stands at 341.21%, compared to the Sensex’s 80.33%. These figures highlight the company’s capacity for long-term value creation despite recent short-term challenges.
The 52-week price range for Chalet Hotels spans from ₹643.65 to ₹1,080.00, with the current price at ₹868.75, indicating that the stock is trading closer to the mid-point of its annual range. The day’s trading saw a high of ₹883.55 and a low of ₹864.05, with a slight decline of 0.83% from the previous close of ₹876.05.
Summary of Analytical Perspective Shift
The recent revision in Chalet Hotels’ evaluation reflects a balanced consideration of multiple factors. On one hand, the company’s strong quarterly and long-term growth in sales and profits demonstrate operational strength and market demand resilience. On the other hand, concerns around management efficiency, as evidenced by modest ROCE and ROE figures, and the high leverage ratio, temper the overall outlook.
Technical indicators suggest a cautious stance, with several signals pointing to mildly bearish trends in the medium term, despite some short-term bullish signs. The stock’s underperformance relative to key market indices over the past year further supports a prudent approach.
Chalet Hotels or something better? Our SwitchER feature analyzes this small-cap Hotels & Resorts stock and recommends superior alternatives based on fundamentals, momentum, and value!
- - SwitchER analysis complete
- - Superior alternatives found
- - Multi-parameter evaluation
Investor Considerations
Investors analysing Chalet Hotels should weigh the company’s strong growth trajectory against its financial leverage and management efficiency metrics. The elevated Debt to EBITDA ratio and significant promoter share pledging introduce elements of risk that may affect stock price stability, especially in volatile market conditions.
Moreover, the technical landscape suggests that while short-term price movements may offer some support, medium-term trends warrant caution. The stock’s historical outperformance over three and five years indicates potential for long-term gains, but recent underperformance relative to market benchmarks highlights the importance of careful timing and risk management.
Overall, the revision in Chalet Hotels’ evaluation underscores the complexity of assessing stocks in the Hotels & Resorts sector, where operational growth must be balanced against financial health and market sentiment.
Only Rs. 14,999 - Get MojoOne + Stock of the Week for 1 Year PLUS 18 Months FREE! Start Saving Now →
