Summary
Apeejay Surrendra Park Hotels Ltd.’s (ASPHL) Q4FY25 result was broadly in-line with our estimates on net sales and EBITDA front, while net profitability disappointed. The company witnessed an increase of 13% YoY in both ARR at 8,758, and RevPAR at 8,074, while occupancy stood at 92%. The management reiterated high teens growth for FY26E, which is encouraging. ASPHL intends to double its key count to about 5400 keys in the next 5 years including 1,011 keys of its own. In Q4FY25 ASPHL signed a binding MoU for the acquisition 60 service apartment under Zillion Hotels and Resorts at Juhu, Mumbai. Further, the company has entered in a MoU to acquire Malabar House at Fort Kochi-a 17 key property and Purity at Lake Vembanad- a 14 key property with an acquisition cost of Rs600mn. We like ASPHL in domestic mid-segment hotels space and maintain BUY rating on the stock with a target price of Rs214 (earlier Rs245), assigning 15x EV/EBITDA on FY27E.
Key Highlights and Investment Rationale
Good show on operating parameters: ASPHL continued to do well on operating metrics with 13% YoY improvement on RevPAR. Net sales grew by 13.9% YoY to Rs1.77bn, while EBITDA grew by 14% YoY to Rs611mn. PAT came in at Rs266mn, higher by 44.2% over Q4FY25. The management reiterated healthy double digit growth in ADR, supported by healthy demand dynamics and planned inventory addition. Further, Flurys has been on a roll and achieved 100 outlets.
Geographic expansion bodes well for future growth, BUY with a TP of Rs214: ASPHL has a strong operating track record of high occupancy, competitive average room rates compared to mid-sized organized peers. With acquisition of properties in Mumbai and Kerala, the company has further strengthened its portfolio. Though there would be near term challenges on increased debt, we believe inventory addition is poised to pay off in near future. BUY with a TP of Rs214.
