The goal implies an upside potential of 35% from the inventory’s closing value on Monday.
Following this, the shares of the corporate rose 5% to hit an intraday excessive of Rs 427.20 on the BSE.
Morgan Stanley’s constructive view is underpinned by a “higher-for-longer” upcycle within the luxurious hospitality section, robust demand for premium journey experiences, and the corporate’s engaging valuation.
The brokerage additionally cited Schloss Bangalore’s low internet debt place and regular execution as key drivers for potential re-rating, whereas flagging focus danger as a key issue to observe.
In keeping with the brokerage’s observe, Schloss Bangalore is likely one of the few listed pure-play luxurious resort operators in India, with a portfolio of iconic heritage-style motels infused with fashionable structure.The corporate owns 5 operational properties, which account for 93% of its income, and has worldwide awards and industry-leading income per out there room (RevPAR) and EBITDA margins to its credit score.Morgan Stanley highlighted that these operational metrics replicate the premium positioning of the model in India’s luxurious hospitality section.
The report additionally famous that demand for luxurious motels in India stays sturdy, at the same time as incremental provide additions are average as a consequence of excessive capital expenditure necessities.
Additionally learn: Jane Road probe: Sebi chief Tuhin Kanta Pandey guidelines out weekly expiry ban, alerts tighter derivatives watch
This demand-supply mismatch helps a sustained uptrend in RevPAR. The brokerage expects annual EBITDA progress of 12% by way of FY27, pushed by rising room charges and wholesome occupancy ranges. Internet revenue is anticipated to develop ninefold, supported by restricted improve in curiosity prices.
Morgan Stanley additionally said that the corporate is sort of net-debt-free, with adequate free money flows to fund its upcoming capital expenditure cycle. Schloss Bangalore plans to open 5 new motels comprising 475 rooms, together with one beneath a three way partnership, with all properties anticipated to be operational by FY28.
Adjusted for asset revaluation and promoter recapitalization, Morgan Stanley estimates the corporate’s return on capital employed (ROCE) at round 10% by FY25, up from a reported 7.3%.
When it comes to valuation, the brokerage sees room for additional upside. The inventory presently trades at 18.5x EV/EBITDA on FY27 estimates, in comparison with a mean of 29x for listed luxurious resort friends comparable to IHCL and house owners of asset-light fashions like Chalet and Juniper, which commerce at round 20x.
In its base case, Morgan Stanley applies a 25x a number of to Schloss’s FY27 EBITDA, with a bull case a number of of 30x, aligned with IHCL’s valuation, suggesting a possible re-rating.
The brokerage, nevertheless, flagged that over 70% of the corporate’s income is concentrated in its prime three properties, indicating a notable focus danger. Moreover, a pointy cyclical downturn in luxurious demand may strain margins, given the corporate’s excessive mounted value and capital-intensive nature.
Round midday right now, the shares of Schloss Bangalore have been buying and selling 4.12% greater at Rs 423.40 on the BSE.
(Disclaimer: Suggestions, solutions, views and opinions given by the specialists are their very own. These don’t signify the views of the Financial Occasions)
