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Samhi Hotels Ltd

| Q3 and 9M FY26 Earnings Conference Call

BULLISH SENTIMENT

Report Source

⬤3rd Feb 26

Summary : SAMHI Hotels delivered strong Q3 FY26 results with robust RevPAR growth and a positive outlook, driven by strategic upscale expansion and resilient demand, despite short-term GST impacts and external disruptions.

Management Perspective positive : Management expressed confidence in strong operating performance, resilience against disruptions, and a robust growth pipeline. They believe GST changes will ultimately lead to higher sales volumes and are excited about broader economic changes.

Concall Report Analysis & Insights

Business Overview

  1. Q3 FY26 saw strong operating performance despite external disruptions.
  2. Same-store RevPAR grew 13% year-on-year to INR 5,643.
  3. Total income increased 16% year-on-year to INR 342 crores.
  4. Underlying EBITDA grew 19% year-on-year, but reported growth was 13.2% due to GST changes.
  5. Net debt stood at INR 1,450 crores with a stable net debt-to-EBITDA of 3x.

Future Growth Prospects

  1. 1,900 incremental rooms are under development or rebranding, with 1,450 net additions.
  2. New projects will shift revenue mix towards upscale/upper upscale from 42% to 60%.
  3. Targeted revenue of INR 3,000 crores by 2030, driven by existing investments.
  4. Strong pipeline of capital-efficient variable leases for future growth, funded by cash flows.
  5. W Hyderabad and Westin Bangalore projects are progressing, expected to lift ARR profile.

Management Insights

  1. The portfolio demonstrated resilience and pricing power despite external disruptions.
  2. Strong operating performance and growth are consistent, managing repeated event risks.
  3. India's economic engine drives strong trend lines in core markets.
  4. GST changes, while impacting short-term margins, will boost sales volumes by making hotels more affordable.
  5. Demand and supply remain extremely favorable for hotel owners and operators in India.

Risk Factors

  1. External disruptions, like airline operational challenges, can impact occupancy.
  2. Changes in GST regulations temporarily impacted EBITDA margins by 200 basis points.
  3. Short-term GST impact on margins is expected for a quarter or two.
  4. Event risks like monsoons or airline crises can compress demand.
  5. Renovations can cause temporary occupancy dips in specific hotels.

Good To Know

  1. Office absorption in core markets remains strong, supporting revenue growth.
  2. The company tracks demand compression and rate response across different occupancy buckets.
  3. Asset recycling opportunities are being explored for 1-2 hotels over 12-18 months.
  4. The company has adequate buffer and incremental GIC investment pending for future cash flow.
  5. New Labour Codes resulted in a one-off INR 11 million booking, but no major payroll structure change expected.

Key Drivers

  1. Strong demand drives pricing power.
  2. New upscale inventory boosts ARR.
  3. Internal accruals fund growth capex.
  4. India's economic engine supports growth.

Key Analyst Discussions

Competitive Environment

  1. Q: How are corporate negotiations for CY '26 faring regarding ARR increases?
  2. A: Dynamic pricing and hotel pricing power are increasing, reducing reliance on fixed RFP rates.
  3. Q: What is the EBITDA margin breakup between ACIC and non-ACIC portfolios?
  4. A: ACIC is fully integrated, both portfolios report similar 40% EBITDA margins.
  5. Q: Will GST changes impact pricing power in the upper mid-scale segment?
  6. A: Pricing is driven by demand and supply, not GST; rate growth has been strong regardless of GST.

Market Trends & Consumer Behavior

  1. Q: Any anticipated uptick from the World Cup next month?
  2. A: February demand is strong, but not solely due to World Cup; general demand compression is high.
  3. Q: What metrics are tracked for demand compression and future visibility?
  4. A: Occupancy bands (e.g., 70-90%, 90%+), average rates within those bands, and mapping holidays/events.
  5. Q: What caused the occupancy decline in the upper upscale segment this quarter?
  6. A: Significant airline disruptions in December led to massive cancellations for group movements and MICE.

Financial Highlights

  1. Q: How is the current quarter shaping up, and will momentum continue?
  2. A: February looks strong, January was slow due to year-end breaks; Q4 momentum expected to continue.
  3. Q: Breakdown of net debt increase and impact on debt reduction guidance?
  4. A: Debt increase due to Navi Mumbai payment; debt reduction guidance remains on track, funded by internal accruals.
  5. Q: Will EBITDA grow slower than revenue due to GST, and are there levers to offset?
  6. A: GST impact is short-term (150-200 bps on margins); levers exist, but will take a quarter or two to offset.
  7. Q: What is the tax rate outlook for FY26 and beyond?
  8. A: No significant tax outflows expected for 3-5 years due to accumulated losses; deferred tax assets may be created.

Product Composition

  1. Q: How are new inventory additions performing, like Trinity Whitefield and Holiday Inn Express?
  2. A: Trinity Bangalore has ramped up well, new rooms in Holiday Inn Express will add to FY27 growth.
  3. Q: Why is F&B income lagging RevPAR growth, and are ballrooms operational?
  4. A: Same-store F&B grew 10% (not 9%), ballrooms are operational and starting to show impact.
  5. Q: How are early demand trends for recently added inventory (Kolkata, Sheraton Hyderabad, Hyatt Regency Pune)?
  6. A: All new hotels are stabilizing well; Whitefield Hotel saw 45% room revenue growth from new rooms.

Strategic Considerations

  1. Q: Are you confident in executing greenfield projects within 2-2.5 years?
  2. A: Work is active on W Hyderabad and Westin Bangalore; other existing hotels will undergo phased renovations.
  3. Q: Update on asset recycling and other inorganic opportunities?
  4. A: Asset recycling for 1-2 hotels is part of the plan; pipeline focuses on capital-efficient variable leases.
  5. Q: Is the INR 3,000 crore revenue ambition achievable without new acquisitions?
  6. A: Yes, based on 9-11% CAGR for same-store revenue and incremental revenues from existing investments.