Buy Lemon Tree Hotels; target of Rs 175: Prabhudas Lilladher

Prabhudas Lilladher's research report on Lemon Tree Hotels

Lemon Tree Hotel Ltd’s (LTHL) operational performance was broadly in-line our estimate with EBITDA of Rs1,842mn (PLe Rs1,870mn) led by 21% growth in RevPAR to Rs5,018. Aurika, MIAL’s performance improved significantly during the quarter with occupancy hovering in early 70’s and an ARR of Rs9,000 odd. Initial trends in 4QFY25E are even better and management expects the hotel to stabilize by 2HFY26E indicating there is further headroom for improvement in KPIs. Led by stabilization of Aurika, MIAL and improvement in RevPAR amid the ongoing renovation exercise which is expected to be complete by end of FY26E, we estimate revenue/EBITDA CAGR of 11%/15% over FY25E-FY27E.

Outlook

In addition, as no major capex is lined up in near term, we expect debt reduction to gather pace from FY26E onwards translating into an PAT CAGR of 38% over the next 2 years. Retain BUY on the stock with a TP of Rs175 (24x FY27E EBITDA; no change in target multiple).