Broking Firm Suggests Buy Midcap Hotels Sector Stock, Sees 48% Strong Gains, Jumps 368.18% In 3 Yrs

ICICI Securities has placed a Buy on Lemon Tree Hotels Ltd. with a target price of Rs. 137/share. The stock with the given target price shows up to 48% potential gain if purchased at the current market price.

Lemon Tree Hotels Ltd. is a hotel chain in India. It operates in the upscale segment and in the mid-priced sector, consisting of the upper-midscale, midscale and economy segments. It is a midcap company with a market capitalisation of Rs. 7,344.12 crore.

Buy for a target price of Rs. 137/share

According to ICICI Securities, Lemon Tree Hotels (LTH) clocked its best-ever quarter in Q4FY23, and with the company having achieved FY23 revenue and EBITDA of Rs8.8bn and Rs4.5bn respectively, the company has exceeded its FY23 guidance of revenue growing 100% YoY to Rs8.0bn at an EBITDA margin of 50%.

While FY23 has been the year of recovery, the focus from FY24 will be on: a) industry demand CAGR over FY23- 27E of over 10% vs. supply CAGR of 4-5%, b) company's plans to add another ~2,800 keys by Mar'25 to take total operational keys to over 11,000, c) opening of the 669 keys owned Aurika Mumbai Airport hotel in Q3FY24 and d) focus on organic debt reduction from FY25E as pending capex of ~Rs3bn (as of May'23) largely for Mumbai Airport hotel is completed by Mar'24.

"We retain our BUY rating with a revised SoTPbased target price of Rs137/share (earlier Rs132) based on 19x Mar'25E EV/EBITDA owing to balance sheet adjustments. Key risks: Discretionary demand slowdown on occupancies and room rates and cost inflation," the brokerage has said.

Stock Outlook

On Friday, the stock closed at Rs. 92.70/share, down 1.64% as compared to its previous close of Rs. 94.25/share. Its 52 week high is Rs. 103.40/share and its 52 week low is Rs. 58.30/share. It declined 2.47% in 1 week. In 1 month it jumped 5.46% and in 3 months, it jumped 18.24%. It gave 31.4% decent return in past 1 year. In 3 years, it gave 368.18% positive return. In 5 years, it gave 27.51% positive return.

Disclaimer - The stock has been picked from the brokerage report of ICICI Securities. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.