Multibagger Praveg stock trades at 30% discount from its recent peak. Should you invest now?

Shares of Praveg , a leading company with over three decades of experience in the tourism and hospitality & event and exhibition sectors, have been on a downward trend since the beginning of 2024, resulting in a 30% decline from its recent all-time high of ₹1,300 per share.

However, recent projections made by the domestic brokerage firm Monarch Networth Capital suggest that the stock may soon reverse course as the company is emerging as a key player in the hospitality sector with a cost-efficient model, positioning it to outperform its hotel industry peers.

Initially known for marquee events like the White Rann Festival and Vibrant Gujarat, Praveg ventured into the hospitality sector in 2015, focusing on creating experiential staycation options in culturally rich and environmentally unique locations. It distinguishes itself by using non-permanent structures like luxury tents to access areas of significant cultural and natural importance, ensuring minimal environmental impact while offering high-end tourist experiences.

Unique business model

Monarch Networth Capital highlighted that Praveg’s portfolio includes resorts in key locations such as Ayodhya, Daman & Diu, Tent City Narmada at the Statue of Unity, and White Rann Utsav in Kutch. The brokerage added that the company’s portfolio is likely to expand further, as Praveg has set ambitious plans to increase its presence in new locations.

Highlighting the setup of these luxury tents, Monarch noted that the process is surprisingly economical. It explained that for properties Praveg manages seasonally, costs are minimized as these are one-time expenses. Unlike traditional hotels, which require extensive civil work, setting up tents is less time-consuming and cheaper.

It further highlighted that if a lease ends, the tents can be dismantled and relocated, making them flexible and cost-effective. This approach reduces overhead and turnaround time, enabling Praveg to quickly establish operational readiness in various locations.

The brokerage also pointed out that, compared to an investment of ₹10 million per room for luxury hotels, luxury tents only require ₹1.5–2 million to set up, while semi-temporary cottages need around ₹3 million.

Praveg can establish a tent city in just two months. Due to limited capex, luxury tents and cottages can break even in the first year with occupancy levels as low as 20% and 40%, respectively. Monarch Networth Capital emphasized that this efficient cost structure and rapid setup capability make Praveg's model highly competitive and adaptable.

Aggressive expansion

The brokerage highlighted Praveg’s ambitious expansion plan, aiming to introduce its unique staycation options to new locations in Maharashtra, Rajasthan, and the Lakshadweep Islands. It noted that with a planned capital expenditure of approximately ₹2,000–2,250 million over the next two years and intentions to launch 13 new properties, the company is poised for significant growth.

Praveg's track record of successfully opening new properties underscores its ability to execute its expansion strategy effectively . The brokerage pointed out that in FY23, Praveg launched 10 new properties, which began generating revenue soon after. These new ventures have bolstered the company's reputation for delivering high-quality, unique hospitality experiences that blend luxury with natural beauty.

The company is set to incur a substantial capex of ₹1,500 million to launch five new properties in the pristine and underrated Lakshadweep Islands. By launching these properties, Praveg will be the first mover in the Lakshadweep market, allowing it to establish a strong presence and brand recognition before its competitors. This strategic early entry will provide Praveg with 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 brokerage stated that the Government of India is constructing a new airport to boost tourism, which will increase flight frequency. It also mentioned that major competitors like Taj Hotels have received contracts for 300 rooms in the region, expected to be operational in FY27.

Upside potential of 26%

"We expect the company to post a revenue CAGR growth of 76% over FY24-27E, driven by the launch of new properties and increasing occupancy levels. EBITDA margins are likely to expand by more than 600 basis points to 38% over the same period on economies of scale—higher occupancy levels and an increase in ARR, and consequently, return ratios, said Monarch Networth Capital.

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 suggests an upside potential of 26% from the stock's most recent closing price of ₹895.70. The brokerage has issued a 'buy' rating for the stock.

Despite the recent sharp correction, the stock has still gained 518% since July 2022.