Stock to Buy: Smallcap stock that can deliver returns of 47%; Do you own it?

Synopsis:- The luxury hotel stock offers up to 47% upside, backed by a brokerage ‘Buy’ call and improving fundamentals. A strong turnaround, 12% revenue growth, expanding room portfolio beyond 5,000 keys, and international expansion plans support medium-term growth expectations.

India’s hotels and resorts sector is riding a strong post‑pandemic rebound, driven by rising domestic travel and steadily recovering foreign arrivals. Industry size is around USD 24–26 billion in 2024 and expanding at a high single to low double‑digit CAGR. Nationwide hotel occupancy has climbed to about 68–70%, supporting robust room pricing and new capacity additions.

With a market capitalization of Rs 13,602.10 crore, the shares of Leela Palaces Hotels & Resorts Ltd were trading at Rs 407.30 per share, decreasing around 1.13 percent as compared to the previous closing price of Rs 411.95 apiece.

Brokerage recommendations

ICICI Securities has turned positive on the hotel stock, assigning a ‘Buy’ rating with a target price of  Rs 600 per share. From the current level of around  Rs 407, the brokerage sees a potential upside of about 47%, reflecting confidence in the company’s growth prospects and improving industry fundamentals.

LEELA stands out as a leading pure-play luxury hospitality brand in India, backed by a strong mix of owned and managed assets. With 14 operational properties and over 4,000 keys, its owned portfolio has consistently outperformed the broader luxury segment on ARR and RevPAR, reflecting premium positioning and pricing power.

Looking ahead, LEELA has a clear expansion roadmap to exceed 5,000 keys by FY30, supported by a solid pipeline of owned and managed hotels. Asset upgrades, repurposing initiatives, and new verticals such as ARQ members’ clubs and luxury residences are expected to further strengthen revenue growth and medium-term earnings visibility.

Financial & other Highlights

The company posted a sharp turnaround in Q2FY26, with revenue rising 12% year-on-year to  Rs 311 crore. More importantly, it moved from a net loss of  Rs 57 crore in Q2FY25 to a profit of  Rs 75 crore, highlighting improved operations, cost control and a recovery in business performance.

The company expects mid-to-high teens growth in FY26, supported by strong luxury demand and operating leverage. EBITDA rose from  Rs 2,157 million in H1FY25 to  Rs 4,846 million in H2FY25, taking FY25 EBITDA to  Rs 7,004 million. For FY26E, H1 EBITDA is projected at  Rs 2,887 million, with further improvement expected in H2.

The Leela has received board approval to acquire a 25% stake in a luxury beachfront resort on Palm Jumeirah, Dubai, marking its international expansion. The 23-acre property includes 546 keys and residences, with the transaction expected to close in Q3 FY26. The investment implies a 12.8x CY25 EBITDA multiple and will be funded through internal accruals and debt.

Leela Palaces, Hotels & Resorts Ltd is a leading luxury hospitality company in India, known for its iconic palaces, resorts, and premium hotels. With a strong focus on bespoke experiences and high-end service, the brand caters to luxury travellers across key domestic and international destinations.

Written by Abhishek Singh

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