Lemon Tree Hotels shares gained over 2.5 percent on March 17 after the company signed a 60-room property in Rajasthan’s Sri Ganganagar, the hotel chain’s sixth new property within a month.
Lemon Tree has announced new properties in Manali, Bhopal, Kasauli, Dapoli, which has two hotels, and now Sri Ganganagar after it came out with its third-quarter numbers in February. These properties are expected to get operational between 2023 and 2026.
At 11 am, Lemon Tree Hotels was quoting at Rs 78.40 on the NSE, up 2.35 percent from the previous close.
The stock, however, has not moved much in the past month. It is down 0.8 percent. Investors who picked up the shares in 2022 are sitting on 5x returns but those who invested 5 years back are looking at only 15.6 percent returns.
Meanwhile, investors who subscribed to the issue at Rs 56 and still holding on the shares have seen the value of their holdings rise 39 percent.
That said, the Street is bullish on the stock. As per Bloomberg data, the stock has 12 "buy" calls, no "hold" and only one “sell” call. The consensus target price on the stock is Rs 105.82, which indicates a 34 percent upside from the current level.
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Busy year ahead
Analysts are bullish because average room rates are on the rise and India is set to host several global events like the cricket world cup and G20 heads of state and government summit this year.
Hotels have optimised their costs over the past two years with staff-to-room ratio now lower by 15-20 percent from the pre-coronavirus levels.
Lemon Tree Hotels last week said that total expenses as a percentage of revenue had come down from 59 percent in pre-COVID times to 46 percent currently.
Foreign brokerage firm CLSA expects the company’s demand to grow at 12 percent compounded annual growth rate (CAGR) and believes it will scale up to 25,000 rooms in five years.
"The company's EBITDA margin will remain above 50 percent. It aims to become debt-free within four years," it said.
In Q3, the hotel chain operator reported consolidated profit at Rs 40 crore for quarter ended December FY23 against loss of Rs 1.87 crore in same period last year.
Consolidated revenue at Rs 233.5 crore for the quarter increased by 62.6 percent over a year-ago period. On the operating front, EBITDA grew by 100 percent YoY to Rs 126.5 crore and margin improved 1,010 basis points to 54.15 percent for the quarter.
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