686% Returns In Post Pandemic: Hotel Stock Turns Rs 1 Lakh Investment To Rs 8 Lakh Since Covid

One of the leading Indian hotels chain companies, Lemon Tree Hotels hit a new 52-week high on Tuesday after the company signed two new properties in Bhubaneswar and Kasauli. Riding on the back of bulls, Lemon Tree shares as now risen by a whopping 686% from their all-time lows that struck during the first wave of the pandemic. Investors who invested Rs 1 lakh during the Covid-19, have recorded significant returns on their lumpsum value as the stock journeyed from less than Rs 14 to over Rs 108 in over 4 years. Brokerage JM Financial is optimistic about the stock going ahead!

At the time of writing, Lemon Tree Hotels stock price traded at Rs 107.21 apiece, up by 1.9% on BSE. The was traded near its new 52-week high of Rs 108.50 apiece that was hit earlier in the day.

On Monday, the company signed two new properties li, Himachal Pradesh. The former is expected to be operational by Q4 of FY 2025 and shall be managed by Carnation Hotels Private Limited, a wholly-owned subsidiary and the management arm of Lemon Tree Hotels Limited. The latter is expected to be operational by Q3 of FY 2026 and shall be matched by Lemon Tree Hotels.

Vikramjit Singh, President - Lemon Tree Hotels, said, the two additions under two diverse models align with the company's asset-light policy. These would expand our offerings in different parts of the country to cater to a variety of travellers in different destinations.

Lemon stock price has skyrocketed by a breathtaking 686.23% since May 21, when it had touched an all-time low of Rs 13.80 apiece. If investors had invested Rs 1 lakh during the all-time low levels, then their investment has risen to nearly Rs 8 lakh to date.

Should you buy Lemon Tree Share?

In its latest research note dated August 16, JM Financial said, "Lemon Tree Hotels (LT) is the market leader in the domestic upper midscale, midscale and economy segment. It operates seven brands including Aurika, which is LT's upscale brand."

The brokerage believes that LT stands to benefit from the industry upcycle owing to its market leadership in the fastest-growing mid-priced (midscale & economy) segment. LT has been successful in
delivering sustainable margin improvement of 700-800 bps with a relentless focus on cost optimisation and lean operations. Aurika Sky City, Mumbai, is the flagship property of LT and will lead earnings growth along with rapid scale-up in fees as the asset-light portfolio also grows over the next 5 years.

Further, on the valuation, the brokerage's note said, "LT is the largest mid-priced hotel chain by number of owned rooms and has deep moats in the form of cost leadership and in-house development, operation and management capabilities. The Mumbai flagship coupled with the company's strategic focus on asset-light expansion should drive earnings, going forward. We estimate Revenue/EBITDA CAGR of 19.5%/19.3% over FY23-26E for LT; we are not building any margin expansion and expect LT's EBITDA margins to remain at ~50%. We expect RoE to improve further from 13.6% in FY23 to 19.6% in FY26E."

Disclaimer:

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