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Investing.com - Morgan Stanley (NYSE:MS) has initiated coverage on Schloss Bangalore Ltd (THELEELA:IN) with an Overweight rating and a price target of INR549.00, representing potential upside for the hotel operator.
The investment bank expects rising room rates and high occupancy to drive 12% annual EBITDA growth through fiscal 2027, with net income projected to increase nine-fold as interest costs decline. The company’s balance sheet is now nearly net-debt-free, providing free cash flow to fund its upcoming expansion.
Schloss Bangalore plans to add five new hotels with 475 rooms, including one under a joint venture, all scheduled to open in fiscal 2028. While fiscal 2025 return on capital employed (ROCE) is currently low at 7.3%, Morgan Stanley calculates it would rise to approximately 10% when adjusted for asset revaluation and higher cash balance from promoter recapitalization.
The stock currently trades at 18.5x fiscal 2027 EV/EBITDA, compared to an average of 29x one-year forward EV/EBITDA for branded hotel companies and about 20x for other asset owners in the sector. Morgan Stanley’s base case values the company at 25x fiscal 2027 EBITDA, in line with the sector average.
The firm’s bull case assigns a target multiple of 30x, similar to Indian Hotels Company Ltd, reflecting confidence in a continued RevPAR (revenue per available room) upcycle and successful ramp-up of new properties.
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