Buy Lemon Tree Hotels, target price Rs 155: HDFC Securities
HDFC Securities has issued a buy call for Lemon Tree Hotels Ltd., setting a target price of Rs 155. Despite a recent dip in occupancy rates, the hotel chain's revenue and EBITDA saw significant year-over-year growth. HDFC Securities predicts stro...
By ETMarkets.com |
iStock
HDFC Securities has buy call on Lemon Tree Hotels Ltd. with a target price of Rs 155. The current market price of Lemon Tree Hotels Ltd. is Rs 121 .
Financials
Lemon Tree Hotels revenue grew 24% YoY to Rs 2.8 billion, in line with consensus. EBITDA rose commensurately by 26% YoY to Rs 1.3 billion, 4% ahead of consensus. ARR for this quarter was Rs 5,902 (+12% YoY). This came with a below-expectation occupancy of 68.4% (-328 bps YoY) which resulted in a modest RevPAR growth of 7% to Rs 4,035. The operational performance was subdued due to the unavailability of ~33% of the under-renovation Keys portfolio and the ongoing ramp-up at Aurika, Mumbai. Despite this, the EBITDA margin improved by 60 bps YoY to 46.0%, although it was impacted by higher renovation expenses. As a result, the adjusted PAT rose by 28% YoY to Rs 296 million.
Investment Rationale
Lemon tree Holtels has a strong expansion plan to build a portfolio of 15,538 rooms across 187 hotels by FY30, with ~80% of these expected by FY27. This represents a sharp leap from an operational portfolio of 10,318 rooms across 112 hotels (owned & leased: 5,759 rooms across 41 hotels). Going forward, the entire pipeline of room additions (except 69 rooms at Aurika, Shimla) is expected to be through the managed/franchised route. This reflects a clear focus by management on assetlight growth and maximising returns from existing owned assets. HDFC Securities expects the ramp-up of Aurika, Mumbai, and mid-single-digit growth in ARR led by renovated rooms to support a 15%+ EBITDA CAGR over the next two years.
Promoter/FII Holdings
Promoters held 22.77 per cent stake in the company as of 30-Sep-2024, while FIIs owned 21.75 per cent, DIIs 18.87 per cent.
Financials
Lemon Tree Hotels revenue grew 24% YoY to Rs 2.8 billion, in line with consensus. EBITDA rose commensurately by 26% YoY to Rs 1.3 billion, 4% ahead of consensus. ARR for this quarter was Rs 5,902 (+12% YoY). This came with a below-expectation occupancy of 68.4% (-328 bps YoY) which resulted in a modest RevPAR growth of 7% to Rs 4,035. The operational performance was subdued due to the unavailability of ~33% of the under-renovation Keys portfolio and the ongoing ramp-up at Aurika, Mumbai. Despite this, the EBITDA margin improved by 60 bps YoY to 46.0%, although it was impacted by higher renovation expenses. As a result, the adjusted PAT rose by 28% YoY to Rs 296 million.
Investment Rationale
Lemon tree Holtels has a strong expansion plan to build a portfolio of 15,538 rooms across 187 hotels by FY30, with ~80% of these expected by FY27. This represents a sharp leap from an operational portfolio of 10,318 rooms across 112 hotels (owned & leased: 5,759 rooms across 41 hotels). Going forward, the entire pipeline of room additions (except 69 rooms at Aurika, Shimla) is expected to be through the managed/franchised route. This reflects a clear focus by management on assetlight growth and maximising returns from existing owned assets. HDFC Securities expects the ramp-up of Aurika, Mumbai, and mid-single-digit growth in ARR led by renovated rooms to support a 15%+ EBITDA CAGR over the next two years.
Promoter/FII Holdings
Promoters held 22.77 per cent stake in the company as of 30-Sep-2024, while FIIs owned 21.75 per cent, DIIs 18.87 per cent.
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