Buy Lemon Tree Hotels; target of Rs 174: Prabhudas Lilladher

Prabhudas Lilladher's research report on Lemon Tree Hotels

LEMONTRE’s operational performance was broadly in-line our estimate with EBITDA margin of 53.9% (PL 53.0%), led by 14.9% growth in RevPAR to Rs5,462 while PAT was aided by a lower tax rate of 11.5%. Aurika, MIAL’s performance showed an improvement with an occupancy of 80% and EBITDA margin of 67% in 4QFY25. Led by stabilization of Aurika, MIAL and improvement in RevPAR amid the ongoing renovation exercise, we estimate revenue/EBITDA CAGR of 12%/15% over FY25-FY27E. 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 (Rs1,905mn of debt was repaid in FY25) translating into a PAT CAGR of 32% over the next 2 years.

Outlook

We broadly maintain our estimates and retain BUY on the stock with a TP of Rs174 (24x FY27E EBITDA; no change in target multiple).