Chalet Hotels (CHALET)

FairStock Score: 51/100 — MIXED

Score breakdown: P/E: 1/3 · ROCE: 0/2 · Growth: 2/2 · Dividend: 0/1

Key Financials

Strengths

• 5-year revenue CAGR of 43.13% and latest quarter sales of ₹582 Cr show strong demand momentum.
• ROE of 19.89% and Piotroski F-Score of 8/9 indicate solid profitability and improving financial health.
• Promoter holding of 67.33% aligns management with minority investors.
• Debt/equity of 0.73 is manageable for a capital-intensive hotel owner.

Concerns

• Free cash flow is negative at ₹-405 Cr despite reported profits, signalling heavy capex or weak cash conversion.
• Valuation is stretched: P/E 29.16, P/B 5.67 and EV/EBITDA 187.67 versus Graham Number of ₹302.13, leaving a margin of safety of -167.47%.
• ROCE of 11.13% is modest, suggesting limited economic moat and high capital intensity.
• Profit growth of 498.98% is likely cyclical/lower-base recovery; dividend yield of only 0.12% provides no compensation while waiting.

AI Analysis

Let me begin with a confession: I do not understand this business well enough to sleep soundly. The hotel industry is cyclical and capital-hungry, and this company proves it. Revenue has grown at 43.13% over five years and sales jumped 69.35%, while profit jumped 498.98%. That sounds wonderful, but profit growth from a low base is not compounding. The latest quarter shows ₹582 Cr revenue and ₹124 Cr net profit; yet free cash flow for the year is negative ₹405 Cr. A business that cannot convert reported profits into cash makes me uneasy. Return on equity is 19.89%, which is good, but return on capital employed is just 11.13% - too close to the cost of capital for a business that must keep spending on rooms and properties. The balance sheet is not alarming: debt/equity is 0.73, and Piotroski is 8 out of 9. Promoter holding at 67.33% at least puts owners in the same boat. But the price tells me to be careful. At ₹788.65, the stock trades at 29.16 times earnings and 5.67 times book value. Graham's number, a conservative floor, is ₹302.13; the margin of safety is negative 167%. EV/EBITDA at 187.67 is absurd. The dividend yield of 0.12% means I am not paid to wait. Altman Z of 2.85 is a yellow flag. I would rather pass than chase this good-looking cyclical at a price that leaves no room for error. I will happily watch it, not own it.

Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer