Chalet Hotels and Sapphire Foods: Weekly Recommendations

The two stocks recommended by SMC Global Securities’ Research Team this week are Chalet Hotels and Sapphire Foods. These two stocks have shown great potential with positive financial estimates for the next two financial years. So, let’s go through the details of the two stock weekly recommendations for the period between February 24, 2025 and February 28, 2025.

Chalet Hotels Limited

Chalet Hotels share price is ₹718.20 (as on February 21, 2025) and its target price is set at ₹839 with an upside potential of 17%.

Chalet Hotels Limited: Investment Rationale

• Chalet Hotels Limited is an owner, developer, asset manager, and operator of high-end hotels and resorts in India, comprising 10 operating hotels & resorts with 3.052 keys across globally recognized hospitality brands including JW Marriott, The Westin, and Novotel, to name a few. It is augmenting its commercial real estate portfolio from the current size of 2.4 million square feet to 3.3 million square feet.
• It is planning the acquisition of Mahananda Spa and Resorts Private Limited, owning company of The Westin Resort and Spa, Himalayas (TWRS) in Rishikesh, a stunning 141-room luxury resort, nestled in the Himalayas. This strategic acquisition strengthens the company’s position in the high-growth leisure, spiritual, and wellness tourism market, unlocking new opportunities for premium experiences and long-term value creation.
• During the quarter ended December 2024, revenue grew 22% YoY to ₹464.5 crores. Consolidated EBITDA rose 23% YoY to ₹211.4 crores. It reported a strong EBITDA margin of 45.5%.

• In the hospitality segment, it recorded a robust 18% growth in the average room rates compared to the same quarter last year, with steady occupancy of 70%, resulting in a 16% increase in RevPAR. Even on a like-to-like basis, portfolio RevPAR grew by 17%, driven by powerful performances in Pune, Bengaluru, and the Mumbai metropolitan region.
• On the project pipeline, the Dukes Retreat is operational with 73 rooms; a restaurant, a bar and a pool. Renovations at Four Points by Sheraton Navi Mumbai are progressing well, with roughly 20% of the rooms and public areas currently in the works, with completion targeted for the whole inventory by July 2025.
• The Taj at Terminal 3 Delhi International Airport is expected to open in Q2 of FY ’27. New hotel projects in Airoli, Mumbai, Varca, Goa, and commercial development Cignus 2 in Powai advancing as planned.
• On the rental and annuity front, its revenue for the quarter was ₹57.7 crores. The EBITDA for the division was at ₹45.5 crores, with 79% margins. In this business, the company expects to reach full potential of the commercial inventory within a couple of quarters.

Chalet Hotels Limited: Shareholding Pattern

The promoters shareholding is highest in Chalet Hotels at 67.42%.

Chalet Hotels Limited: Valuation

The company is optimistic about the outlook for the next few years driven by infrastructure support, robust corporate travel, and a growing MICE segment.

Management expects continued double-digit RevPAR growth, supported by strong domestic travel and anticipated growth in foreign travel post-airport expansions. Its annuity portfolio, which is counter to the cyclicality of the hospitality industry, is ramping up rapidly.

Thus, it is expected that the stock may see a price target of ₹839 in 8 to 10 months’ time frame on target P/BV of 5.30x and FY26 BVPS of ₹158.25.

Chalet Hotels Limited: Risk

• Economic Slowdown
• Intense Competition

Sapphire Foods Limited

Sapphire Foods share price is ₹327.60 (as on February 21, 2025) and its target price is set at ₹406 with an upside potential of 24%.

Sapphire Foods Limited: Investment Rationale

• Sapphire Foods started operations in September 2015, through the acquisition of about 270 KFC and Pizza Hut Stores in India and Sri Lanka, by a group of leading Private Equity firms and is managed by a team of professionals.
• Sapphire Foods is a leading YUM franchise operator in the Indian subcontinent with a presence in India, Sri Lanka, and Maldives. As of Dec 31, 2024, it owns and operates 496 KFC and 339 Pizza Hut restaurants in India, 116 Pizza Hut and 10 Taco Bell restaurants in Sri Lanka, and 1 KFC and Pizza Hut each in Maldives.
• Sapphire KFC’s SSSG (Same-store sales Growth) trajectory improved compared to the previous two quarters, with SSSG remaining mostly flat. This improvement was driven by a focus on value offers for core products.

• Restaurant sales grew by 12%, and the restaurant EBITDA margin stood at 18.2%, reflecting a 190 basis point YoY decline due to operating deleverage. Its strategy for SSSG recovery focuses on increasing consumption occasions through value offerings on core products, introducing product innovations (such as Chicken Roll and Zinger Burger variants, along with Snackers), and targeting specific dayparts (lunch, late night, and Wednesdays).
• In Q3FY25, the company delivered a strong performance with double-digit growth across all three verticals: KFC, Pizza Hut, and Sri Lanka. Adjusted EBITDA grew by ₹81 crores, reflecting a 12% increase, and all three business segments achieved double-digit revenue growth.
• Restaurant EBITDA rose by 9% year-on-year, with the restaurant EBITDA margin at 15.4%, down by 60 basis points compared to the previous year. During the quarter, the company added 54 new restaurants, bringing the total to 963, including 35 KFC and 16 Pizza Hut stores in India, and 5 stores in Sri Lanka.
• According to the company’s management, KFC margins are expected to stabilize at around 18%, with a 5% SSSG necessary to counteract inflation. For Pizza Hut, ADS (Average Daily Sale) levels are key to margin expansion, with a target range of INR 47,000-55,000 required to achieve desired profitability.
• Looking ahead, the company expects to open 70-80 new stores annually. Regarding the Sri Lanka operation, management is optimistic about sustainable growth prospects, targeting a 15% revenue CAGR in the medium to long term.

Sapphire Foods Limited: Shareholding Pattern

In the overall shareholding of Sapphire Foods, institutions have the highest shareholding of 38.32%.

Sapphire Foods Limited: Valuation

The company is making significant progress in driving growth across its brands and geographies, with a strong focus on expanding margins in India. According to management, as the market improves, market leaders will benefit, supported by robust fundamentals and enhanced customer experience initiatives.

Ongoing network expansion, continuous innovation, new product launches, and operational improvements are expected to boost margins and overall business performance.

Thus, it is expected that the stock will see a price target of ₹406 in 8 to 10 months’ time frame on target P/BV of 8.90x and FY26 BVPS of ₹45.63.

Sapphire Foods Limited: Risk

• Economic Slowdown
• Regulatory Risk

Conclusion

These two stocks, one from the hospitality sector and the other from the QSR sector can reach their target price in the coming 8 to 10 months. However, it is always better if you do your analysis before investing and set a stop-loss target. To keep track of your invested stocks, open a demat account with SMC Global Securities and invest on the go.

Reference:
https://www.smctradeonline.com/research/wise-money/241

Author: All Content is verified by SMC Global Securities.