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ICICI Securities Report
Stocks to Buy: Retain Buy; SoTP-based target price of Rs 164 (based on 23 times Sep-26E EV/Ebitda) unchanged.
As of September 2024, Lemon Tree Hotels Ltd. has 10,318 operational keys across 112 hotels. The company has an aggressive room expansion plan for H2 FY25–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. We expect Lemon Tree to deliver revenue and Ebitda compound annual growth rates 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 three–four years (debt of Rs 19.1 billion, as of Sep'24).
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