Buy Lemon Tree Hotels; target of Rs 25: Motilal Oswal

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Motilal Oswal 's research report on Lemon Tree Hotels

Lemon Tree Hotels (LEMONTRE)’s revenue grew 17% YoY, with like-for-like EBITDA (adj. for Ind-AS) growing 13%, largely driven by new hotel additions (absent in the base quarter) and the Keys Hotels acquisition. COVID-19 dented performance, reflected in decline in occupancy by 13pp YoY (to 65%) during the quarter. This led to decline of 13% in RevPAR; thus, on a samehotel basis, EBITDA declined 22% YoY, restricting consolidated EBITDA growth. MoM improvement at LEMONTRE’s operational hotel is quite impressive; operational hotels generated hotel-level GOP of INR22m in May’20 (v/s INR1m in April’20). Factoring in near-term weakness in demand, we cut our revenue estimates by 28%/24% for FY21/FY22 and EBITDA estimates by 1%/16% for FY21/FY22.

Outlook

We value the stock on an SOTP basis and arrive at a target price of INR25. Maintain Buy.

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