Royale Manor Hotels & Industries Ltd: Valuation Shift Signals Price Attractiveness Change

Valuation Metrics: A Closer Look

As of the latest assessment, Royale Manor’s P/E ratio stands at 25.47, a figure that, while still elevated, marks a decrease from previous levels that classified the stock as very expensive. This ratio compares the company’s current share price of ₹33.90 against its earnings per share, indicating that investors are paying roughly 25.5 times the company’s earnings. In the context of the Hotels & Resorts sector, this valuation is expensive but less stretched than peers such as Benares Hotels and Viceroy Hotels, which exhibit P/E ratios of 28.19 and 29.65 respectively, both categorised as very expensive.

The price-to-book value ratio has also moderated to 1.10, suggesting that the stock is trading just above its net asset value. This is a significant improvement compared to the sector’s more inflated valuations, where some competitors trade at much higher multiples or are loss-making, such as Mac Charles (India) and Asian Hotels (North), which lack meaningful P/E data due to negative earnings.

Comparative Enterprise Value Multiples

Enterprise value (EV) multiples provide further insight into the company’s valuation relative to earnings before interest, taxes, depreciation and amortisation (EBITDA). Royale Manor’s EV to EBITDA ratio is 21.26, which is higher than some attractive peers like Advent Hotels (14.53) and Kamat Hotels (8.60), but lower than the risky HLV at 27.77. This suggests that while Royale Manor remains on the pricier side, it is not the most overvalued in its sector.

Similarly, the EV to EBIT ratio of 35.61 indicates a premium valuation, reflecting the market’s expectations of future earnings growth despite the company’s modest return on capital employed (ROCE) of 3.09% and return on equity (ROE) of 4.30%. These returns are relatively low, signalling operational challenges or capital inefficiencies that investors should consider.

Market Performance and Returns

Examining Royale Manor’s stock returns against the benchmark Sensex reveals a mixed picture. Over the past week, the stock gained 0.89%, outperforming the Sensex’s decline of 1.14%. However, over longer periods, the stock has underperformed significantly. Year-to-date, Royale Manor has declined by 10.67%, compared to a 3.04% drop in the Sensex. Over the past year, the stock’s return was negative 22.51%, while the Sensex rose by 8.52%. Despite this, the company has delivered strong long-term returns, with a 5-year gain of 134.93% and a 3-year gain of 59.15%, both well above the Sensex’s respective 60.30% and 36.73% returns.

Mojo Score and Analyst Ratings

Royale Manor’s current Mojo Score is 17.0, which corresponds to a Strong Sell rating. This represents a downgrade from its previous Sell grade as of 18 August 2025. The downgrade reflects deteriorating fundamentals and valuation concerns despite the slight improvement in price multiples. The company’s Market Cap Grade is 4, indicating a relatively small market capitalisation that may contribute to liquidity risks and higher volatility.

The Strong Sell rating is consistent with the company’s modest profitability metrics and elevated valuation multiples, suggesting that the stock remains unattractive for risk-averse investors. The absence of a dividend yield further diminishes the stock’s appeal for income-focused portfolios.

Sector and Peer Context

Within the Hotels & Resorts sector, Royale Manor’s valuation is positioned between very expensive and attractive peers. While companies like Kamat Hotels and Advani Hotels are rated as very attractive with P/E ratios below 22 and lower EV/EBITDA multiples, others such as Benares Hotels and Viceroy Hotels remain very expensive with P/E ratios approaching 30 or higher.

Royale Manor’s valuation shift from very expensive to expensive suggests a modest correction in market expectations, possibly driven by recent price consolidation and earnings stability. However, the company’s low ROCE and ROE indicate that operational improvements are necessary to justify higher valuations sustainably.

Price Range and Volatility

The stock’s current price of ₹33.90 is near its 52-week low of ₹30.50, significantly below its 52-week high of ₹63.99. This wide trading range highlights considerable volatility and investor uncertainty. Today’s trading range between ₹32.70 and ₹33.95 with a marginal day change of 0.30% reflects subdued market activity and cautious sentiment.

Investment Implications

For investors analysing Royale Manor Hotels & Industries Ltd, the recent valuation adjustment offers a nuanced perspective. The shift from very expensive to expensive valuation multiples indicates a partial correction in price, potentially improving the stock’s attractiveness relative to its historical highs. However, the company’s weak profitability metrics and modest returns on capital caution against aggressive accumulation.

Comparatively, peers with more attractive valuations and stronger operational metrics may offer better risk-reward profiles. The stock’s underperformance relative to the Sensex over the past year and year-to-date periods further underscores the need for careful selection within the sector.

In summary, while Royale Manor’s valuation parameters have improved slightly, the overall investment case remains challenged by fundamental weaknesses and competitive pressures. Investors should weigh these factors carefully and consider alternative opportunities within the Hotels & Resorts sector that demonstrate stronger financial health and more compelling valuations.

Conclusion

Royale Manor Hotels & Industries Ltd’s valuation shift from very expensive to expensive reflects a modest improvement in price attractiveness, driven by a decline in P/E and P/BV ratios. Despite this, the company’s low ROCE and ROE, combined with a Strong Sell Mojo Grade, suggest that the stock remains a risky proposition. Long-term investors may find better value in peers with more favourable fundamentals and valuation metrics. The stock’s recent price volatility and underperformance relative to the broader market further reinforce the need for caution.

Unlock special upgrade rates for a limited period. Start Saving Now →