Motilal Oswal's research report on Lemon Tree
During the last one year, Lemon Tree (LEMONTRE) has performed better than the industry in terms of growth and profitability. Going forward, addition of Aurika MIAL (its largest hotel having 669 rooms) coupled with the company’s five-year (CY24 to CY28) road map, has the potential to propel the next leg of growth for LEMONTRE. Aurika MIAL, which is likely to be operational by Oct’23, will be the biggest addition to LEMONTRE’s arsenal. The hotel will boost the company’s dynamics in the form of higher Average Room Rate (ARR), better margins and improved brand mix. The management’s five-year road map focusses on accelerated room additions (majorly management contracts), higher margin (~50%) and better channel mix (64% retail share). Additionally, the company plans to simplify its corporate structure into two entities – Standalone (all managed hotels) and Fleur Hotels (all owned assets). Further, management also plans to list Fleur hotels to unlock value.
Outlook
We expect LEMONTRE to deliver a revenue/EBITDA/Adj. PAT CAGR of 28%/25%/ 43% over FY23-25. Its RoE would improve to 21.9% by FY25E. We reiterate our BUY rating on the stock with a TP of INR115 (premised on FY25E SoTP).
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