Chalet Hotels Upgraded to 'Hold' by MarketsMOJO, Shows Strong Short-Term Performance

Chalet Hotels, a midcap company in the hotel, resort, and restaurant industry, has recently been upgraded to a 'Hold' by MarketsMOJO on October 14, 2024. This upgrade is based on the company's positive financial results for the last 12 consecutive quarters.
The company's operating cash flow has been consistently high, with the highest at Rs 689.44 crore. Its operating profit to interest ratio is also at its highest at 4.43 times. Additionally, the net sales for the last half-year have grown at a rate of 20.14%.

Technically, the stock is in a bullish range and has shown improvement from mildly bullish on October 8, 2024. Multiple factors, such as MACD, Bollinger Band, and KST, indicate a bullish trend for the stock.

Chalet Hotels has also shown consistent returns over the last three years, outperforming BSE 500 in each of the last three annual periods. However, its long-term fundamental strength is weak, with an average return on capital employed (ROCE) of 3.74%. The company's net sales and operating profit have grown at a slow rate of 8.14% and 17.70%, respectively, over the last five years. It also has a high debt to EBITDA ratio of 126.05 times, indicating a low ability to service debt.

The stock is currently trading at a premium compared to its historical valuations, with a very expensive valuation of 4.7 enterprise value to capital employed. Although it has generated a return of 48.26% in the last year, its profits have only risen by 19.7%, resulting in a high PEG ratio of 6.2.

Furthermore, 31.93% of the promoter shares are pledged, which can put additional downward pressure on the stock prices in falling markets. Overall, while Chalet Hotels has shown positive financial results in the short term, its long-term fundamentals and valuation may be a cause for concern for investors.