Target: ₹160

CMP: ₹141.95

Lemon Tree Hotels (LTH) is a leader in the midscale-economy segment with a 13.6 per cent market share by branded room inventory. As of December 2023, the company has an operational inventory of 9,687 rooms, including a recent addition of a 669 rooms– Aurika MIAL. The inauguration of Aurika MIAL is a milestone expected to boost both top and bottom-line performance.

LTH is now expanding its presence in the Luxury and upscale segment. The company owns 5,759 rooms and manages 3,928 rooms with a robust pipeline of 3,677 rooms through management contracts as of Dec’23. The company is aggressively adding Managed rooms to achieve its target of 70 per cent managed inventory and total rooms of about 20,000+ by FY28.

We believe Lemon Tree Hotels is well-positioned to benefit from the growth in the Indian Hospitality Industry due to the favourable demand scenario. The company has industry-leading EBITDA margins of about 51 per cent on the back of cost rationalisation at granular levels. With no major upcoming capex, the Company is expected to be debt-free by FY28. With demand set to outpace supply in the industry, occupancy and ARR visibility improve.