ICICI Securities, a domestic brokerage house and research firm, increased its target price on Lemon Tree Hotels from 125 to 132, representing a potential 80% increase over the stock’s Friday closing price of 73.75 per share.
With the business having achieved 9MFY23 revenue and EBITDA of 6.2 billion and 3.1 billion, respectively, LTH recorded its best-ever quarter in Q3FY23. The brokerage thinks LTH will achieve its FY23 guidance of 100% year-over-year sales growth to 8.0 billion at a 50% EBITDA margin.
“While FY23 has been the year of recovery, the focus from FY24 will be on industry demand CAGR over FY23-27E of over 10 per cent versus supply CAGR of 4-5 per cent, company’s plans to add another 2,800 keys by 25 March to take total operational keys to over 11,000, opening of the 669 keys owned Aurika Mumbai Airport hotel in H2FY24 and focus on organic debt reduction from FY25E as pending capex of ₹5 billion largely for Mumbai Airport hotel is completed by 24 March,” the note stated.
“While FY23 has been the year of recovery, the focus from FY24 will be on industry demand CAGR over FY23-27E of over 10 per cent versus supply CAGR of 4-5 per cent, company’s plans to add another 2,800 keys by 25 March to take total operational keys to over 11,000, opening of the 669 keys owned Aurika Mumbai Airport hotel in H2FY24 and focus on organic debt reduction from FY25E as pending capex of ₹5 billion largely for Mumbai Airport hotel is completed by 24 March,” the note stated.
The brokerage retained its FY23-24E estimates and raised its FY25E revenue and EBITDA estimates by 18 per cent factoring in faster occupancy ramp-up for Aurika Mumbai Airport hotel.
Key risks, as per the brokerage, include prolonged impact of Covid on occupancies and room rates and cost inflation.
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