Buy Lemon Tree Hotels; target of Rs 155: Prabhudas Lilladher

Prabhudas Lilladher's research report on Lemon Tree Hotels

Lemon Tree’s (LTHL) operational performance was better than estimates with EBITDA margin of 52.4% (PLe 49.7%), despite higher renovation expense and deflationary impact of Aurika, Mumbai, which opened in Oct-23, but is not yet stable. Nonetheless, Aurika’s 4QFY24 KPIs are encouraging with occupancy of ~66% and ARR of Rs9,000, and we expect revenues of Rs2.4bn/Rs2.8bn and EBITDA margin of 55%/60% in FY25E/FY26E, respectively. Backed by the opening of Aurika, Mumbai, and expansion in managed room portfolio, we expect revenue/EBITDA CAGR of 18%/23% over FY24-FY26E.

Outlook

We broadly maintain our estimates and retain ‘BUY’ on the stock with a revised TP of Rs155 (earlier Rs153) valuing it at an EV/EBITDA multiple of 23x (no change in target multiple).

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