Target: ₹137
CMP: ₹93.85
Lemon Tree Hotels (LTH) clocked its best-ever quarter in Q4FY23. With the company having achieved FY23 revenue and EBITDA of ₹880 crore and ₹450 crore respectively, the company has exceeded its FY23 guidance of revenue growing 100 per cent year on year to ₹800 crore at an EBITDA margin of 50 per cent.
While FY23 has been the year of recovery, the focus from FY24 will be on: industry demand CAGR over FY23-27 of over 10 per cent vs supply CAGR of 4-5 per cent; company’s plans to add another 2,800 keys by March 2025 to take total operational keys to over 11,000; opening of the 669-keys Aurika Mumbai Airport hotel in Q3FY24, and focus on organic debt reduction from FY25 as pending capex of about ₹300 crore (as of May 2023) largely for Mumbai Airport hotel is completed by March 2024.
We retain our Buy rating with a revised SoTP-based target price of ₹137/share (earlier ₹132), based on 19x March 25 EV/EBITDA owing to balance sheet adjustments.
Key risks: Discretionary demand slowdown on occupancies and room rates and cost inflation.