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

Prabhudas Lilladher's research report on Lemon Tree Hotels

We cut our EPS estimates by 6%/5%/1% for FY26E/FY27E/FY28E as we fine tune a) our other expense assumptions given the ongoing renovation exercise and b) raise our interest expense forecast as we tweak our deleveraging timelines (debt reduction of Rs885mn in 1HFY26). LEMONTRE IN’s operational performance was disappointing with EBITDA margin of 42.7% (PLe 45.1%) due to increased investments in renovation, technology, and onetime ex-gratia payment to employees. Led by gradual stabilization of Aurika, MIAL and expected improvement in RevPAR given the ongoing renovation exercise, we estimate revenue/EBITDA CAGR of 9%/12% over FY25-FY28E. Near term growth will hinge on improvement in same-store RevPAR as 91/165 keys at Shimla/Shillong are expected to be operationalized in FY27E/FY28E while inauguration of Aurika, NCR is at-least 3-4 years away (exact timeline is not disclosed).

Outlook

We maintain HOLD on the stock with a TP of Rs174 (24x Sep-27E EBITDA; no change in target multiple).