Once the direction is set for the stock by big players, its difficult for the stock to come out till another big force changes its direction.
1 Like
They have guided for 400 Cr revenue for FY26, which I belief should be achievable. As per my calculation 70Cr PAT should be achievable. Not sure why it is being punished severely. It is available at Lowest PE, P/S and EV/EBIT compared to peers.
2 Likes
The company grew YOY but severly underperformed QOQ, I think that might be the reason why market punished it.
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The hotel industry is cyclic in nature, similar to retail. Q3 is best quarter in hotel and retail. So we should alway look for YoY instead of QoQ. And YoY number is not bad. But looks like market might have been expecting higher topline. And hence it is getting punished.
3 Likes
One reason might be margins. I believe they had previously guided for higher margins but in the bharat connect conference it was guided lower. Management guidance can’t be taken at face value and that might be the reason why the stock is rated lower. There were CG issues in a recent merger as well if I recall correctly.
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Whatever its today kamat does not deserve 9% fall at the most it should not have gone up. Fall from 350 to 208 also looks suspicious. We can appreciate the mgmt the way they are doing concalls, presentations, reducing debt, clearing pledge but no so when we consider stock movement.
2 Likes
This is also quite conservative . They have 2 banquet halls which are coming on their owned properties, which has higher EBITA .
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This interest costs also include interest expenses on lease liabilities as per ind as. So 10.5 percent on debt and balance interest is lease component
The company achieved an adjusted revenue of Rs 345.4 crs in FY25 after excluding one time revenue of 8.89crs in q2 and 8.16 crs in q3 of reversal of provisions for property taxes in the mumbai properties. So to achieve 400 crs it needs to achieve 16 percent revenue growth which is achievable even though some hotels are opening in h2. Overall ebitda margins would reduce as some new properties have revenue share components and new hotels will be stabilising in FY26 and merger costs. So margins on full year basis should be 26 percent and ebitda should be 105 crs and pat should reach close to 50 crs for FY26 considering lease interest and lease depreciation components and capex on increase in dep due to capex of pune hotel. The stock is quite reasonable in the hotel sector and considering legacy issues are resolved, and deleveraging it should be related soon. Only issue is merger overhang and dilution of 15.6 percent due to merger , but manor palghar land parcel development could bring benefits
3 Likes
I just want to know if they share revenue, will they again pay lease interest ? Pune depreciation will come to 4 cr per yr if we consider 10 yrs life, but will add 60 extra rooms, 2 banquet halls, higher ARR for 460 rooms. This year also they may show some 10cr ED money as extra revenue/profit. Then other normal income 10cr, Int cost should be around 13 cr(120cr debt*.105), 20cr dep(Didnt consider pune for this yr). So even if companys ebitda is around 105cr, profit should be around 60cr considering fall in int cost. Also I dont believe all these calculations as mgmt can easily show plus or minus 5%(total 10% variation) ebitda, to suit their requirements. I think these calculations are just to find worst case scenarios or to find best price to buy the stock.
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Just a yr back mgmt used to claim 35% ebitda on 400cr revenue. For the time being clean balance sheet, nil pledges, low pe should provide support to the stock. If they push to 200 levels, I thing big support will come again from retail, so I dont think it will go below 200, may be max 220 unless other wise war/tariffs issue takes the world again.
So as per hotel industry trends post COVID, 35 percent ebitda is for mature hotels and it takes min 2 yrs for a hotel to mature and reach those levels depending on the market , brand and competition.Earlier in pre covid times it would take longer. Also considering lease expenses of 20 percent, pbt for leased hotel is 15 percent pre tax and 12 percent post tax. In initial year of operation ,a new hotel will have occupancy of 50 percent and just breakeven or barely contribute considering 20 -25 percent of ebitda and lease of 20 percent , so net return is 0-5 percent. In case of leased hotels some hotels are fixed lease which will be accounted in interest and depreciation as per ind as 116 and some new properties are variable lease which is minimum lease rental + revenue share. In variable lease , the minimum lease portion would be accounted for lease rentals in depreciation and interest as per ind as 116 and additional revenue share will be accounted as rent in operating expenses. For instance ira orchid mumbai which was sold and leased based on short term lease around 21crs gets deducted in operating expenses and not in depreciation and interest expenses. I am assuming current run rate of 12 crs interest on loan and 28 crs lease expenses accounted interest and depreciation so around 40 crs. This leaves around 65 crs So post tax rate of 25 per cent pat will be close to 50 crs excluding any exceptional items or other income. Pune new rooms and banquet will take time ie 12 months and contribute from FY27. Also you need to consider that FY23 to FY25 pat had lot of exceptional items and ira orchid was owned till oct 2023 so no lease expenses of 21 crs were accounted. Even considering dilution, considering base case fair value should be close to 400 if it gets rerated after couple of quarters. FY27 is when operating leverage for new hotels should kick in. Key drivers would be new signings, and Puri hotel execution which I have not considered in my thesis.
6 Likes
considering market is forward looking what will be the PAT and EBITA for kamat Hotels at the end of FY27 ? To me it seems like it will easily be a jump of 70-100% considering number of rooms are increasing by almost 50 % and older properties they are renovating and refurbishing for a higher ARPU . Even if it doesn’t re-rate which it probably should if you look at various parameters, it should be closer to 450-500 at the end of FY27 at the current EV/EBITA of 8. If it re-rates to most other similar hotel stocks at an EV/EBITA of 21 , the stock price will be closer to 1000-1200 . Which will make it 5 to 6 x in let’s say 1.5 -2 years . By that time the management will have a war chest of conservatively 100 cr every year for 2 years to expand and bring in further properties . There is government push to develop this industry as well . Demand is a key risk in this sector but we seem away from over-supply for now . Also a good sector which should shine given it has limited to none geo-political risks, regulatory risks , strategic locations acting as moats to some extent . Invested a bit so biased .
4 Likes
The management quality has been dodgy. The merger is not minority shareholder friendly. Guidance has constantly been missed and changed. Mr Kamat even skipped a concall recently after a huge miss in guidance in q1 (I think). The CFO had made a grand mess in that concall with inept statements. It would be good to see the stock re-rate but personally I remain pessimistic towards a rerating. The perception of this stock outside retail isn’t great. Reratings are usually driven by institutions.
5 Likes
Kamat Hotels -
Q4 and year end FY 25 results and concall highlights -
Q4 outcomes -
Revenues - 92 vs 84 cr, up 9.5 pc
EBITDA - 25 vs 23 cr, up 6.5 pc ( margins @ 27 vs 28 pc )
PAT - 11 vs 2 cr, up 423 pc ( due lower finance costs, down @ 5 vs 15 cr YoY )
FY 25 outcomes -
Revenues - 362 vs 304 cr, up 19 pc
EBITDA - 104 vs 91 cr , up 14 pc ( margins @ 29 vs 30 pc )
Finance costs - 30 vs 60 cr
PAT - 47 vs 45 cr, up 4 pc ( LY, there was an exceptional gain of 29 cr )
Upcoming properties -
Orchid Hotels -
Rishikesh - Jul 25
Dehradun - Dec 25
Gwalior - Dec 25
Puri - Dec 26
Mandvi ( Kutch ) - Dec 27
Ira by Orchid -
Hyderabad - Jul 25
Bhavnagar - Oct 25
Currently operational hotels -
Orchid Hotels - Mumbai, Lonavala, Pune, Shimla, Manali, Jamnagar, Chandigarh
Ira by Orchid - Mumbai, Bhuvneshwar, Nashik, Shambaji Nagar, Ayodhya, Noida, Toyam
Lotus Beach resorts - Konark, Goa, Murund
Heritage hotels - Fort Jadhavgarh, Madhodadhi Palace
Total - 19 hotels
Orchid - Chandigarh started operations in last week of April 25
Avg Occupany in Q4 was at 65 pc
Debt on books now @ 105 cr
Orchid Pune ( owned property ) is currently under renovation. Once it restarts operations, it ll help them improve revenues and EBITDA
As newer hotels go on stream ( mostly on leased / revenue share model, only a few are going to be managed properties ) - the EBITDA margins are likely to gradually come down ( due payment of rentals / lease amounts vs no such payments in case of owned / managed hotels )
Guiding for 400 cr in topline in FY 26 ( conservative guidance )
Q4 is always weaker vs Q3. Revenue buoyancy wise, best to worst Qtrs in decreasing order ( in general, for Kamat Hotels ) are - Q4 > Q3 > Q1 > Q2
Aprox 32 pc of company’s business comes from repeat business ( pointing towards descent customer satisfaction / loyalty )
The Orchid Pune will have 2 large banquet halls. Plus the renovated hotel is likely to have additional rooms. These 2 factors should be margin accretive for FY 26
Cash in hand @ 25 cr. Therefore, the net Debt is only @ 80 cr. Even on the gross debt of 105 cr, the RoI is 10.5 pc which is likely to further come down in FY 26. By end of FY 26, the Gross debt is likely to reduce to around 75 cr ( reduction @ 7-8 cr / Qtr ) - should bring down the interest costs meaningfully for FY 26
ARR in Q4 vs Q3 FY 25 @ Rs 6.5k vs Rs 6.4k. Occupancy in Q4 vs Q3 FY 25 @ 65 pc vs 65 pc . Despite this, the total revenues have fallen from 110 to 92 cr. This is because of a steep fall in income derived from events, F&B, Banqueting etc which generally boom in Q3 due peak tourism, marriage season
The no of rooms / Hotels that the company is going to add in FY 26 are significant. However, these new rooms / hotels should take some time to ramp up
The total capex for renovation at Pune hotel should be around 40 cr ( everything to be funded from internal accruals )
Management believes their Chandigarh hotel should do a 20-22 cr topline in current FY. Should stabilise @ 30 cr/yr, once the hotel stabilises
The renovation of their Goa property is complete. They did spend 14 cr towards the same
Ayodhya, Jamnagar, Shambhaji Nagar, Noida hotels ( opened recently ) are doing well. Specially the Ayodhya hotel - which did exceedingly well in Q4. Jamnagar hotel started slowly but is now doing well. However, ARRs in Jamnagar are lower
The management reiterated that their topline guidance of 400 cr for FY 26 is a conservative estimate
Company expects Rishikesh and Hyderabad property to do a topline of aprox Rs 10 and 7 cr in current FY
Disc: holding, biased, not SEBI registered, not a buy/sell recommendation
9 Likes
Kamat Hotels -
Q1 FY 25 results and concall highlights -
Revenues - 82 vs 74 cr, up 12 pc
EBITDA - 18 vs 13 cr, up 37 pc ( margins @ 22 vs 18 pc )
PAT - 4.3 vs 1.1 cr, up 290 pc ( finance costs are down from 11.4 to 6 cr )
Currently operational hotels -
Orchid Hotels - Mumbai, Lonavala, Pune, Shimla, Manali, Jamnagar, Chandigarh, Toyam, Goa ( out of these - 2 hotels are owned, 4 are leased, 1 is on a revenue share model and 2 are managed ). Orchid Goa and Orchid Mumbai are the owned hotels. Orchid Lonavala is a managed property
Ira by Orchid - Mumbai, Bhuvneshwar, Nashik, Shambaji Nagar, Ayodhya, Noida ( 4 are leased, 2 are on a revenue share model )
Lotus resorts - Konark, Murund ( both are leased )
Heritage hotels - Fort Jadhavgarh, Madhodadhi Palace ( both are leased )
Total - 19 hotels
Orchid - Chandigarh started operations in last week of April 25
Upcoming properties -
Orchid Hotels -
Rishikesh - Aug 25
Dehradun - Dec 25
Gwalior - Mar 26
Puri - Dec 26
Mandvi ( Kutch ) - Dec 27
Panchgani - Sep 25
Nahsik - Apr 26
Rishikesh ( second one ) - Mar 27
Ira by Orchid -
Hyderabad - Jul 25
Bhavnagar - Oct 25
Dwarka - Oct 25
Basically - there are 11 hotels in pipeline ( all on Leased / Renvenue share model ) to be opened by end of FY 27
65 pc of company’s sales come from repeat customers - indicating strong brand loyalty
Brand Wise ARR / Occupancy -
Orchid - Rs 6338 vs Rs 5384, up 18 pc / Occupancy @ 56 vs 61 pc
IRA by Orchid - Rs 5416 vs Rs 4590, up 18 pc / Occupancy @ 74 vs 62 pc
Lotus - Rs 5514 vs Rs 5020, up 10 pc / Occupancy @ 59 vs 51 pc
Fort Jadhavgarh - Rs 8051 vs Rs 7984 / Occupancy @ 30 vs 35 pc
First 15 days of May saw a sharp slowdown in Company’s properties like - Chandigarh, Manali, Shimla ( due Op-Sindoor ) - otherwise revenues would ve grown a little more
Orchid - Rishikesh should go live in Aug. Four more hotels expected to go live in Q3 @ Panchgani, Bhavnagar, Hyderabad and Dwarka. Basically by Dec 25 - company’s total operational hotels should reach 23 ( from 19 currently ). Another 3 hotels should go live in H1 of next calendar year @ Dehradun, Gwalior, Nahsik
Orchid Mumbai ( 370 rooms ) and Orchid Pune ( 410 rooms ) are their 2 large hotels - both doing exceedingly well ( managing hotels > 250 rooms requires good management skills - its a kind of testimony to their operational excellence )
Once the renovation at Orchid Pune is complete, it should do even better ( + they are adding 2 more banquet halls there )
Should be able to clock at least 29 pc kind of EBITDA margins for full FY ( as was the case LY )
Aiming to hit a topline of > 500 cr for FY 27 - since a lot of hotel additions shall happen between now and Mar 27
Company is targeting an avg ARR of 14-15k @ their new Rishikesh property going live this month. Its a premium hotel with excellent location
Should be able to do > 400 cr of revenues for FY 26. Management agreed their guidance is on the conservative side
Company’s Gross debt at present is @ 96 cr ( vs 105 cr on 30 Mar ) @ 10 pc rate of interest. Company aims to bring it down to 9 pc
Disc: holding, biased, not SEBI registered, not a buy/sell recommendation, posted for educational purposes only
4 Likes
Kamat group has been executing well. As per their commitment , they may end up having 2500 keys which is roughly 40% higher than current . I have used their two properties recently and both are excellent. Infact the one at Ayodhaya jee one has excellent location and ARR of 12k per night excluding taxes.
I have enquired their OTA contracts and they are able to extract commission comparable to some of best brands from OTA.
With domestic travelling going up , I am expecting we may be looking at 750 cr revenue by FY27 arond 25-26% opm ( takign conservative bet on OPM) .
4 Likes
Solid commentary.
4000-5000 keys in medium term.
Capex finally picking up after years of relentless debt reduction.
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really bad results. Long rainy season explain revenue de growth but bottom line went to bottom .
waiting for con call to understand what went wrong and future plan.
Yes very disappointing results, even though management said growth will come from second half. I didn’t expected such degrowth, monsoon might have been the reason.