Buy Lemon Tree Hotels; target of Rs 150: Anand Rathi

Anand Rathi's research report on Lemon Tree Hotels

Led by a ~13% y/y rise in inventory (Aurika MIAL property operational from Q3 FY24) and ~9% y/y ARR growth, Lemon Tree Hotel’s Q1 revenue grew 19.5%. Occupancy was ~66.6%, ~70.2% a year back. The EBITDA margin was ~42.9%, down ~455bps y/y, ~946bps q/q due to higher renovation/digital transformation expenses along with increased employee expenses.

Outlook

Hence, factoring in the below-expected Q1 margins, we cut our FY25e/26e EBITDA by 16.9/14.2% and accordingly lower our TP to Rs150 (Rs180 earlier), 20x FY26e EV/EBITDA, while maintaining our Buy recommendation.

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