Buy Lemon Tree Hotels; target of Rs 170: Prabhudas Lilladher

Prabhudas Lilladher's research report on Lemon Tree Hotels

We cut our EBITDA estimates by ~2% over FY25-FY27E as we fine tune our fee income assumptions amid delays in opening timelines of managed & franchised hotels. LEMONTRE IN’s operational performance was marginally better than our estimate with EBITDA margin of 44.5% (PLe 43.2%) led by 19.4% growth in RevPAR to Rs4,523 and 6.3% YoY fall in power & fuel cost amid investments made in renewable energy. Led by gradual stabilization of Aurika, MIAL (occupancy of 76.6% in 1QFY26 amid increase in negotiated business) and expected improvement in RevPAR given the ongoing renovation exercise, we estimate revenue /EBITDA CAGR of 11%/14% over FY25-FY27E.

Outlook

In addition, as no major capex is lined up in near term barring the hotels in Shimla and Shillong, we expect debt reduction to gather pace from FY26E onwards translating into a PAT CAGR of 30% over the next 2 years. Retain BUY on the stock with a TP of Rs170 (24x FY27E EBITDA; no change in target multiple).

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