Lemon Tree Hotels: A Sweet Investment Opportunity with a Target of Rs 140

In the dynamic world of stock trading, finding the right investment opportunities can be akin to searching for a hidden gem. One such gem that has caught the attention of experts is Lemon Tree Hotels Ltd (LTHL). In this comprehensive analysis, we will delve into the reasons why Prabhudas Lilladher recommends a ‘BUY’ rating on Lemon Tree Hotels and sets a target price of Rs 140.

The Rise of Lemon Tree Hotels

Lemon Tree Hotels has steadily carved its niche in the Indian hospitality industry, and it’s not by chance. Here’s why the experts are bullish on this stock:

Leadership in the Midscale/Economy Segment

Lemon Tree Hotels boasts a commendable ~19% market share in the midscale and economy hotel segment. This leadership position is a testament to the company’s commitment to providing quality accommodation options to a wide range of travelers.

Strategic Expansion Plans

One key factor driving optimism around Lemon Tree Hotels is its aggressive expansion strategy. The company is all set to grow through an asset-light management contract route. This approach not only strengthens the balance sheet but also enhances the margin profile.

The Aurika Hotel Advantage

Aurika, a prestigious addition to Lemon Tree Hotels, is set to be a game-changer. Located strategically near the Mumbai airport in a bustling micro-market, Aurika is poised to generate substantial revenues. In its second full year of operations (FY26E), it is expected to contribute Rs 2,764 million with an impressive EBITDA margin of 60%.

Growth Projections

With the imminent opening of Aurika in October 2023 and the addition of 4,808 managed rooms by FY26E, Lemon Tree Hotels is poised for remarkable growth. The revenue and profit after tax (PAT) are projected to grow at a compounded annual rate of 19% and 36%, respectively, from FY23 to FY26E.

The Outlook

To assess the value of Lemon Tree Hotels, a Sum-of-the-Parts (SOTP) analysis is employed. The standalone business is valued at 21 times FY26E EBITDA, while Fleur, an asset-owning subsidiary in which Lemon Tree Hotels holds a 59% stake, is valued at 22 times FY26E EBITDA. This meticulous evaluation leads to a per-share value of Rs 140.

Conclusion

In conclusion, Lemon Tree Hotels presents a compelling investment opportunity in the ever-evolving Indian hospitality industry. With its dominant position in the midscale and economy segment, strategic expansion plans, and the forthcoming Aurika hotel, it is poised for robust growth. Prabhudas Lilladher’s ‘BUY’ rating with a target price of Rs 140 suggests that this stock could be the sweetest addition to your investment portfolio. So, don’t miss out on the zest that Lemon Tree Hotels brings to the table.

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