Royal Orchid Hotels LtdQ1 FY23Leisure Services

Royal Orchid Hotels Ltd

Q1 FY23 Earnings Call Analysis

Management growth scorecard

Revenue

Category 1

Margin

Category 3

Fundraise

Yes

Order

Yes

Capex

Yes

4 of 5 growth signals are positive — a strong management growth story.

Full analysis

Revenue guidance

Category 1

→Targeted revenue for the current financial year is INR 400 crores, up from INR 263 crores reported for the previous year, indicating substantial growth.
→EBITDA is expected to increase to INR 120 crores from INR 98.3 crores in FY '23.
→Expansion plan includes increasing the number of hotels from about 90 currently to 140-150 by the end of the financial year.
→Room capacity expected to grow from approximately 5,400 rooms to between 7,500 and 8,000 rooms by FY '24.
→About 24 signed hotels in the pipeline adding around 1,100 rooms, with further plans for 20-25 more hotels adding 1,500 rooms.
→Expected average room rate (ARR) growth of around 15% in the current financial year.
→Occupancy is already high at about 77%, with limited scope for further increases.
→Majority (~80-85%) of new hotels will be on management contracts, minimizing capex and encouraging asset-light growth.

Margin guidance

Category 3

→FY '24 revenue target: INR400 crores, up from INR263 crores in FY '23.
→FY '24 EBITDA target: INR120 crores, up from INR98 crores in FY '23.
→EBITDA margin expected to be slightly lower due to increased revenue from lower-margin revenue share models.
→PAT before exceptional items for Q4 FY '23 rose 159% YoY to INR12.98 crores; annual PAT nearly doubled at INR50 crores.
→Dividend payouts expected to increase next year with higher profits.
→Strong expected ARR growth: 10-15% uplift forecast for the current financial year.
→Occupancy levels likely to be stable around 77%, not expected to grow significantly further.
→Expansion plans include over 60 new hotels (~3000 rooms) in pipeline, focusing mostly (80%) on asset-light management contracts to improve margins and returns.
→ROCE and ROE expected to improve with growing share of management contracts and revenue share models.

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Fundraise plans

Yes

→The company plans to utilize internal accruals primarily for renovations and growth initiatives rather than raising new capital.
→There is no mention of any immediate or planned new fundraising through debt or equity in the current discussions.
→Cash generated will be used for buying out partners in some subsidiaries and for hotel renovations.
→Dividend payouts are planned to increase next year, indicating available cash flow but no clear indication of raising new funds.
→The company is focusing on management contracts and revenue-sharing models, which require lower capex and reduce the need for large external funding.
→No explicit plans or announcements regarding new debt or equity fundraising were made in the provided transcript.

Order book

Yes

- Royal Orchid Hotels currently has around 24 hotels signed in the pipeline, which will add approximately 1,100 rooms. - This addition will bring the total rooms to about 6,500 soon. - The company is targeting an additional 1,500 rooms through another 20-25 hotels, aiming to reach between 7,500 and 8,000 rooms. - There is ongoing work on both brownfield and greenfield projects for further conversions and new capacity additions, but exact bifurcation is not finalized. - The development teams are in discussion to decide on these projects, ensuring a steady pipeline for future years. - The company plans to expand hotel count to 140-150 hotels by the end of FY '24, up from 90 hotels currently operating. Overall, the orderbook shows a robust pipeline with signed hotels and active projects aimed at significant growth in rooms and hotel count.

Capex plans

Yes

→The company plans to use internal accruals of around INR 10-15 crores for renovating 2-3 existing hotels in the current financial year, as no major capex has been done in the last 4-5 years.
→New hotel additions under the revenue share model involve capex of approximately INR 5-6 crores per hotel (typically 70-80 rooms) in the first year. Management contracts require no capex.
→The company targets adding about 40-50 new hotels in the next year, with about 10-15 on revenue sharing.
→Plans include buying out partners in some subsidiaries/hotels to develop properties independently.
→Expansion into international markets (Sri Lanka, Thailand, Nepal) is exploratory with a recently appointed VP leading the effort; no specific capex details mentioned yet.

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