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The stock had declined nearly 4% on Monday, January 27, due to broad-based selling in the market.
The brokerage initiated coverage with a ‘buy’ rating and a target price of ₹308, citing the company’s strategic expansion into premium segments and its focus on turning around underperforming assets.
Elara projects a revenue CAGR of 12% and an EBITDA CAGR of 26% between FY24 and FY27, with PAT expected to turn positive in FY25 and grow to ₹1,891 million by FY27.
Samhi’s growth strategy involves adding 857 keys (18% growth over FY24 inventory of 4,801 keys) by FY29, targeting revenue growth through new hotel openings, expansion of existing properties, and renovation-driven rebranding.
These initiatives are expected to yield an incremental revenue of ₹800 million from new hotels and ₹700 million annually through rebranding efforts, according to the brokerage.
Samhi is also making a significant pivot toward the upper-upscale and upscale segments, particularly in IT hubs such as Bengaluru and Hyderabad. The company is adding 532 keys across three properties in these cities, including a twin hotel complex in Bengaluru’s Whitefield area, featuring hotels under upper-upscale and upscale brands.
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All five analysts covering Samhi Hotels have a ‘buy’ rating on the stock, making it a standout pick in the hospitality sector. Ambit Capital’s target price of ₹350 indicates a potential upside of 93.8% from Monday’s close.
At the current market price, Samhi is trading at an enterprise value (EV) per key of ₹11 million. EV per key is a key metric in the hospitality industry, representing the valuation assigned to each room or ‘key’ in the hotel portfolio. It accounts for the combined cost of land, construction, and other associated investments for each hotel room.
For Samhi, this valuation aligns with its blended construction cost for a comparable portfolio, suggesting the stock is attractively priced.
Risk factor
Despite robust fundamentals, Elara flagged a risk tied to the impending sale of 34 million shares (16% of the paid-up capital) by private equity investors, whose lock-in period expires on March 21, 2025. This supply overhang could weigh on the stock, especially if shares are sold in the open market rather than through block trades.
“We expect these exits to happen in the block trade window to arrest price erosion. Selling these shares in the open market implies the stock price will see a sharp decline, and this is a key risk to our call,” the company said.
The company highlighted that Samhi has built a solid reputation for turning acquired properties into profitable ventures. Elara also recommend a ‘buy’ rating on the stock with a target price of ₹308, based on a valuation of 16x FY27 estimated EV/EBITDA.
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However, peers like Lemon Tree Hotels and Chalet Hotels are valued higher at 20x and 22x, respectively. This difference reflects SAMHI’s higher debt levels, which make it more vulnerable to risks during downturns in the hospitality sector.