Multibagger Praveg Stock at 30% Discount: Is This the Perfect Time to Invest in the Next Big Hotel Industry Play?

Shares of Praveg, a leading company with over three decades in tourism, hospitality, and event management, have dropped 30% from their all-time high of ₹1,300 per share since the start of 2024. However, domestic brokerage firm Monarch Networth Capital believes the stock might soon bounce back as Praveg is positioning itself as a key player in the hospitality sector with a cost-efficient business model, putting it ahead of its competitors in the hotel industry.

From Events to Hospitality

Praveg, initially recognized for organizing major events like the White Rann Festival and Vibrant Gujarat, entered the hospitality sector in 2015. The company focuses on creating unique staycation experiences in culturally and environmentally significant locations. By using non-permanent structures like luxury tents, Praveg offers high-end tourism experiences with minimal environmental impact.

A Unique Business Model

Monarch Networth Capital highlighted Praveg’s innovative approach, which includes setting up resorts in prime locations like Ayodhya, Daman & Diu, Tent City Narmada at the Statue of Unity, and the White Rann Utsav in Kutch. The brokerage also noted that Praveg plans to expand further with ambitions to establish a presence in new locations.

Setting up these luxury tents is surprisingly economical. Unlike traditional hotels that require extensive construction work, Praveg’s tents are cheaper and quicker to set up. The process involves one-time expenses for seasonal properties, and if a lease ends, the tents can be dismantled and moved elsewhere. This flexibility reduces costs and allows Praveg to quickly start operations in various locations.

Compared to the ₹10 million investment per room for luxury hotels, luxury tents cost only ₹1.5–2 million, while semi-permanent cottages require about ₹3 million. Praveg can establish a tent city in just two months. With minimal capital expenditure, these luxury tents and cottages can break even within the first year, even with low occupancy levels.

Aggressive Expansion Plans

Monarch Networth Capital highlighted Praveg’s aggressive expansion strategy, aiming to introduce its unique staycation options in new locations across Maharashtra, Rajasthan, and the Lakshadweep Islands. With a planned investment of ₹2,000–2,250 million over the next two years and the intention to launch 13 new properties, the company is set for significant growth.

Praveg’s successful track record in opening new properties reinforces its ability to execute its expansion strategy effectively. In FY23, the company launched 10 new properties, which quickly began generating revenue. These new ventures have further strengthened Praveg’s reputation for offering high-quality, unique hospitality experiences that blend luxury with natural beauty.

One of Praveg’s major upcoming projects includes the launch of five new properties in the pristine Lakshadweep Islands, with a substantial investment of ₹1,500 million. By being the first to enter this market, Praveg will establish a strong presence and brand recognition before its competitors. This strategic move is expected to give Praveg a significant advantage in capturing the growing tourism market in Lakshadweep.

Currently, connectivity to Lakshadweep is limited, with only 2-3 daily flights. However, the Government of India is constructing a new airport to boost tourism, which will increase flight frequency. The brokerage also mentioned that major competitors like Taj Hotels have secured contracts for 300 rooms in the region, expected to be operational by FY27.

Potential Upside of 26%

Monarch Networth Capital expects Praveg to achieve a revenue growth rate of 76% over FY24-27, driven by the launch of new properties and increasing occupancy levels. EBITDA margins are expected to expand by over 600 basis points to 38% during this period, thanks to economies of scale, higher occupancy levels, and an increase in average room rates. As a result, return ratios are likely to improve.

The brokerage has set a target price of ₹1,130 for the stock, based on a valuation of 28 times the estimated Q2FY27 EPS of ₹40.3. This target indicates a potential upside of 26% from the stock’s most recent closing price of ₹895.70. Monarch Networth Capital has issued a ‘buy’ rating for the stock.

Despite the recent correction, Praveg’s stock has still gained 518% since July 2022, showcasing its strong performance over time.