Buy Lemon Tree; target of Rs 86: HDFC Securities

HDFC Securities is bullish on Lemon Tree has recommended buy rating on the stock with a target price of Rs 86 in its research report dated November 16, 2018.

Broker Research

November 21, 2018 / 15:47 IST

26 Aug, 2025 12:21

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HDFC Securities' research report on Lemon Tree

Lemon Tree’s (LTHL) 2QFY19 performance was in-line. Revenue/EBITDA at Rs 1.3/0.4bn grew by 15.3/26.5% YoY. PAT jumped to Rs 57mn (vs. loss of Rs 33mn in 2QFY18) owing to higher other income. We like LTHL owing to (1) its superior execution reflected in industry’s leading growth, occupancies (consistently 75%+), lower capex/room and operating costs (2) LTHL’s owned rooms will grow by 50% from 3,277 as of FY18 to 4,802 by FY21E. Geographic diversion and improving mix of keys (90% of incremental inventory is 4-star vs. current 29%) in demand dense higher ARR markets to drive strong growth. EBITDA potential of incremental rooms is equivalent to existing portfolio (3) Robust growth in rooms under management contract (4x over FY16-18, to double over FY18-21E) is strategically positive and will further drive up ROCEs.

Outlook

Led by the above factors, LTHL’s EBITDA is set to triple over FY18-22 from Rs 1.4bn to Rs 4bn. Reiterate BUY with a TP of Rs 86, 30x Sep-20E EV/EBITDA.

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