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Hold Lemon Tree Hotels; target of Rs 26: ICICI Direct

ICICI Direct recommended hold rating on Lemon Tree Hotels with a target price of Rs 26 in its research report dated August 11, 2020.

August 12, 2020 / 05:38 PM IST
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ICICI Direct's research report on Lemon Tree Hotels

Lemon Tree’s (LTH) business was severely affected by lockdown in Q1FY21. Revenues fell 71.1% YoY to Rs 40.7 crore (vs. I-direct estimate: Rs 43.7 crore) as only 71% of its inventory was operational. Occupancy in operational hotels was at 40.4%, leading to average occupancy of 28.9% for the quarter. Average room rates were also down 34.4% YoY to Rs 2626/room. Key demand segments for business were Indians returning from abroad, global IT majors for their business continuity and on duty doctors & paramedical staffs. Total expenses were at Rs 36.3 crore in Q1FY21, down 62.2% YoY vs. Rs 96.2 crore in Q1FY20. EBITDA fell 90.2% YoY from Rs 44.8 crore in Q1FY20 to Rs 4.4 crore in Q1FY21 (vs. I-direct estimated EBITDA loss of Rs 3.9 crore). Resultant EBITDA margin was at 10.7% vs. 31.8% reported last year. With a sharp increase in interest costs (up 57.5% YoY to Rs 48.7 crore), net loss was at Rs 60.5 crore (vs. I-direct estimated net loss of Rs 50.2 crore).


The outlook would remain challenging with recoveries not expected before FY22E. LTH’s management expects the ongoing crisis to lead to 15-20% of room inventory getting wiped out, auguring well for the company in the long run. However, near term challenges w.r.t. weak industry dynamics, high D/E and expected equity dilution compel us to maintain HOLD rating with revised target price Rs 26/share (SOTP based valuation).


For all recommendations report, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on are their own, and not that of the website or its management. advises users to check with certified experts before taking any investment decisions.

Broker Research
first published: Aug 12, 2020 05:38 pm

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