Shares of Lemon Tree Hotels rose more than 2.5% on March 17 after the company signed a 60-room property in Rajasthan’s Sri Ganganagar, the hotel chain’s sixth new property in a month.
Lemon Tree has announced new properties in Manali, Bhopal, Kasauli and Dapoli, with two hotels among them, and now Sri Ganganagar after releasing its third-quarter figures in February. The properties are expected to be operational between 2023 and 2026.
At 11 am, Lemon Tree Hotels quoted Rs 78.40 on the NSE, up 2.35% from the previous close.
However, the stock has not moved much over the past month. It fell 0.8%. Investors who bought stocks in 2022 will have a 5 times return, compared to just 15.6% for investors who invested 5 years ago.
Meanwhile, investors who subscribed for the stock at Rs 56 and still held it saw a 39 per cent rise in the value of their holdings.
That said, the Street is bullish on the stock. The stock has 12 “buy” ratings, no “hold” ratings and just one “sell” rating, according to Bloomberg data. The stock has a consensus target price of Rs 105.82, representing an upside of 34% from current levels.
Analysts are bullish because average house prices are rising, and the country will host several global events this year, including the Cricket World Cup and the G20 summit of heads of state and government.
The hotel has optimized costs over the past two years, and the staff-to-room ratio is now 15-20% lower than pre-coronavirus levels.
Lemon Tree Hotels said last week that total expenses as a percentage of revenue had fallen from 59% pre-COVID to 46%.
Foreign brokerage CLSA expects the company’s demand to grow at a compound annual growth rate (CAGR) of 12% and believes it will expand to 25,000 rooms within five years.
“The company’s EBITDA margin will remain above 50%. It aims to achieve zero debt within four years,” it said.
In the third quarter, the hotel chain operator posted a consolidated profit of Rs 40 crore for the quarter that ended December 23, compared to a loss of Rs 1.87 crore a year earlier.
Consolidated revenue for the quarter stood at Rs 233.5 crore, up 62.6% year-on-year. On the operational front, EBITDA for the quarter grew by 100% year-on-year to Rs 126.5 crore, and the margin improved by 1,010 basis points to 54.15%.