ICICI Securities has upped its target on Lemon Tree Hotels to Rs 132 a piece from Rs 125 a piece, suggesting a potential 75 per cent upside over its Thursday’s intraday price of Rs 75.24 a piece.
To recall, Lemon Tree Hotels had December as its best-ever quarter. The hotelier reported revenues of Rs 620 crore in the first nine-months of FY23; Ebitda during the nine-months period stood at Rs 310 crore.
ICICI Securities said Lemon Tree is on track to meet its FY23 guidance of revenues growing 100 per cent YoY to Rs 8,00 crore at an Ebitda margin of 50 per cent.
While FY23 has been the year of recovery, the focus from FY24 will be on a likely 10 per cent growth in industry demand compounded annually over FY23-27E against supply CAGR of 4-5 per cent, ICICI Securities said.
Also, eyes would be on the company’s plans to add another 2,800 keys by March 2025 to take total operational keys to over 11,000. ICICI Securities noted that the company is also focusing on organic debt reduction from FY25, as pending capex of Rs 500 crore largely for Mumbai Airport hotel is seen completing by March 2024.
“We retain our FY23-24E estimates and raise our FY25E revenue and Ebitda estimates by 18 per cent factoring in faster occupancy ramp-up for Aurika Mumbai Airport hotel and maintain our BUY rating with a revised SoTP-based target price of Rs 132 per share against Rs 125 earlier, based on 20 times March 2025E EV/Ebitda,” ICICI Securities said.
ICICI Securities said the Aurika Mumbai Airport hotel is expected to see a soft opening in October 2023, which is expected to be a key driver for earnings from FY25E. The hotel had a pending capex of Rs 450 crore as of December 2022.
“Depending on how quickly it scales up, the hotel can deliver annual Ebitda ranging between Rs 100-140 crore in its first full year of stabilised operations assuming ARRs of Rs 12,000 and occupancy of 60 per cent in FY25. Tthe existing Lemon Tree Premier at Andheri East, Mumbai, is currently clocking ARRs in excess of Rs10,000),” it said.
Post the opening of the Mumbai Airport hotel in H2FY24, the key monitorable going forward is operating cash flows translating into organic net debt reduction over the medium term, the brokerage added.
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