Buy Lemon Tree Hotels, target price Rs 164: ICICI Securities

ICICI Securities has a buy call on Lemon Tree Hotels with a target price of Rs 164. The current market price of Lemon Tree Hotels Ltd. is Rs 136.65. Lemon Tree Hotels, incorporated in 1992, is a Mid Cap company with a market cap of Rs 10829.22 crore, operating in Tourism & Hospitality sector.

Lemon Tree Hotels' key Products/Revenue Segments include Income from Rooms, Restaurants & Other Services and Other Operating Revenue for the year ending 31-Mar-2024.

Financials

For the quarter ended 30-09-2024, the company has reported a Consolidated Total Income of Rs 284.84 crore, up 5.16% from last quarter Total Income of Rs 270.86 crore and up 23.78% from last year same quarter Total Income of Rs 230.12 crore. The company has reported net profit after tax of Rs 34.88 crore in the latest quarter.

Investment Rationale
As of Sep'24, Lemon Tree Hotels has 10,318 operational keys across 112 hotels. The company has an aggressive room expansion plan for H2FY25-FY29 with an incremental 5,220 keys should take overall operational keys to 15,538 by FY29-30E. In the near term, FY25E operations may remain constrained by ongoing renovations in its Keys portfolio and other owned/leased hotels. ICICI Securities expects Lemon Tree to deliver revenue and EBITDA CAGRs of 22% over FY24?27E as Aurika, its Mumbai airport hotel, fully stabilises, and renovated rooms and management contract revenues see an uptick. As earnings scale up in the medium term, the company expects debt levels to gradually dip over the next 3-4 years (debt of Rs 19.1 billion, as of Sep'24). ICICI Securities has retained a BUY rating; the SoTP-based target price of Rs 164 (based on 23x Sep'26E EV/EBITDA) unchanged.

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.