Motilal Oswal Places Buy On Hotels Sector Stock Under Rs 100, Sees 25% Upside Potential

Motilal Oswal has come up with a Buy call on Lemon Tree Hotels Ltd. (LEMONTRE) with a target price of Rs 115 apiece. According to the given target price, the stock is likely to give a robust return of up to 25% if purchased at the current market price.

During the last one year, Lemon Tree has performed better than the industry in terms of growth and profitability. Going forward, addition of Aurika MIAL (its largest hotel having 669 rooms) coupled with the company's five-year (CY24 to CY28) road map, has the potential to propel the next leg of growth for LEMONTRE, according to Motilal Oswal

Valuation

According to Motilal Oswal, Aurika MIAL's addition to LEMONTRE's portfolio will be a game changer. The addition will result in improved ARR, brand mix and margins at the consolidated level, which will further pave the way for enhancing the Aurika brand via management contracts that will lead to exponential growth of management fees. The corporate restructuring plan will help the company in simplifying its current corporate structure and also accelerate its debt repayment target.

"FY23 was a robust year for the company and we expect the strong momentum to continue going forward, led by: i) further improvement in occupancy on the back of a resilient demand scenario; ii) an increase in ARR with the addition of Aurika MIAL; and iii) strong addition of hotels under management contracts," the broekrage said.

It added, "We expect LEMONTRE to deliver a revenue/EBITDA/Adj. PAT CAGR of 28%/25%/ 43% over FY23-25. Its RoE would improve to 21.9% by FY25E. We reiterate our BUY rating on the stock with a TP of INR115 (premised on FY25E SoTP)."

Stock Outlool

On Friday, the stock of Lemon Tree closed 1.22% higher at Rs 92.32 apiece with an intraday high of Rs 94 apiece and an intraday low of Rs 91.70 apiece.

It surged 0.65% in 1 week. In 3 months, it jumped 19.68%. It gave 43.91% in 1 year. In 2 years, it gave 114.20% positive return and in 3 years, it gave 289.54% positive return. It gave 22.28% positive return in 5 years.
The stock traded 52 week high at Rs 103.30 apiece and its 52-week low at Rs 3.45 apiece, respectively.

About - Lemon Tree Hotels Ltd.

Lemon Tree Hotels Ltd is the third largest overall hotel chain in India. It operate in the upscale segment and in the mid-priced sector, consisting of the upper-midscale, midscale and economy segments. With a market valuation of Rs 7,314.02 Crore, it is a midcap company.

Disclaimer

The stock has been picked from the brokerage report of Motilal Oswal. 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.