Lemon Tree is undergoing a strategic transformation with renovations of ~75% (~4,300 rooms) until H1 FY26. Of the ~4300 odd rooms, ~2300-2400 rooms are done by Q3 FY25 (~2,600-2700 by end FY25), especially of high yielding Lemon Tree Premier Hotels in key cities of Pune, Aerocity Delhi, Hyd, Bengaluru etc.
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Dolat Capital Report
Lemon Tree Hotels Ltd.'s Q3 FY25 results came in line and were healthy. Revenue/ Ebitda/adjusted profit after tax grew by +23/32/77% YoY.
The company has multiple triggers over FY26-27 viz.
renovation of big-box LT Premier hotels in key cities during FY25 to drive average room rate growth,
renovation expenses to be stable in FY26 versus FY25,
uptick in Aurika Mumbai with occupancies hitting desired levels of ~85%,
deleveraging and
potential listing of Fleur.
We have increased our FY25-27E Ebitda estimates by 5/10/7% and EPS estimates by 11/15/8% and target multiple from 20x to 24x FY27E EV/E, driven by impending triggers, strong execution and cycle tailwinds.
We expect a robust Rev/Ebitda/APAT CAGR of 12/17/32% over FY25-27E. We upgrade our rating to ‘Accumulate' from Reduce.
Our revised target price is Rs 170 at 24x FY27E EV/E (pre IndAS) versus Rs 128 at 20x FY27E EV/E.
Key risks include cycle reversal after three robust years or sub-par performance of Aurika Mumbai.
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