Buy Lemon Tree Hotels; target of Rs 158 Prabhudas Lilladher

Prabhudas Lilladher's research report on Lemon Tree Hotels

Despite the ongoing renovation exercise, Lemon Tree Hotel Ltd’s (LTHL) operational performance was better than our estimate with EBITDA margin of 46.0% (PLe 44.6%) led by better cost control and 3% beat on the revenue front. While Aurika, MIAL’s occupancy stood at 50%+ in 2QFY25, management expects sharp recovery in 2HFY25 with EBITDA margin of 60%+. In addition, as renovation exercise is typically a 1H phenomenon, we expect the overall operational performance to improve in 2HFY25E. Led by stabilization of Aurika, MIAL and improvement in RevPAR amid the ongoing renovation exercise we expect revenue/EBITDA CAGR of 11%/21% over FY25E-FY27E.

Outlook

LTHL trades at EV/EBITDA multiple of 13.7x/11.9x over our FY26E/FY27E estimates, unadjusted for the minority interest in Fleur. We broadly maintain our estimates and retain BUY with a TP of Rs158 (24x FY26E EBITDA; no change in target multiple).