Hold Lemon Tree Hotels; target of Rs 32: ICICI Direct

ICICI Direct recommended hold rating on Lemon Tree Hotels with a target price of Rs 32 in its research report dated November 10, 2020.

Broker Research

November 12, 2020 / 18:07 IST

26 Aug, 2025 12:21

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ICICI Direct's research report on Lemon Tree Hotels

Lemon Tree reported a weak set of Q2FY21 numbers amid the ongoing pandemic environment. However, the company managed to report EBITDA though at negligible level due to stringent cost control measures initiated during the quarter. Revenues for the quarter fell 68.8% YoY to Rs 47.6 crore (vs. I-direct estimate of Rs 52 crore) as only 86% of the company’s inventory was operational. Occupancy in operational hotels was at 37.3% leading to average occupancy of 32.4% for the quarter (down 4240 bps YoY, up 347 bps QoQ). Average room rates were also down 35.6% YoY to Rs 2,654/room (up 1.1% QoQ). Total expenses were at Rs 39.3 crore in Q2FY21, down 62.3% YoY, up 8.3% QoQ. Sharp reduction in employee costs (down 61% YoY to Rs 14.3 crore) and other cost (down 60% YoY to Rs12.2) kept cost lower during the quarter leading to company reporting EBITDA of Rs 8.3 crore (I-direct estimate: Rs 7.7 crore). With a sharp increase in interest costs (up 41% YoY to Rs 49.7 crore), the company reported a net loss of Rs 53.6 crore (vs. I-direct estimated net loss of Rs 56.2 crore).

Outlook

The ongoing crisis is expected to lead to ~15% room inventory reduction, auguring well for LTH in the long run. However, near term challenges with respect to weak industry dynamics and high D/E remain key concern for the company. Hence, we maintain our HOLD rating with a revised target price of Rs 32/share (SOTP based valuation).

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