Buy Lemon Tree Hotels; target of Rs 200: Motilal Oswal

Motilal Oswal's research report on Lemon Tree Hotels

Lemon Tree Hotels (LEMONTRE) reported decent revenue growth of 8% YoY in 2QFY26, led by average room rate (ARR) growth of 6% YoY to INR6,247. Occupancy rate (OR) improved 140bp YoY to 69.8%. However, EBITDA margins declined by 330bp YoY due to increased investments in renovation, technology and one-time ex-gratia payments to employees (8% of revenue in 2Q). LEMONTRE saw steady growth momentum in 2Q, despite macro headwinds such as tariff wars, floods and GST revisions. However, 2H is expected to be strong, backed by more operational rooms (less renovation in 2H), higher MICE activity (more wedding days) and healthy tourism-led demand. As a result, we expect double-digit RevPAR growth in 2H, led by high ARR growth.

Outlook

We expect LEMONTRE to post a CAGR of 11%/13%/35% in revenue/EBITDA/adj. PAT over FY25-28, with RoCE improving to ~21% by FY28 from ~11.7% in FY25. We reiterate our BUY rating on the stock with our SoTP-based TP of INR200 for FY28..