Lemon Tree Q1 Results Review - Operating Margin Disappointed: IDBI Capital

IDBI Capital Report

Lemon Tree Hotels Ltd.’s Q1 FY25 net sales and Ebitda were in-line with our estimates while profit after tax was disappointed. Despite increase in revenue per available room on YoY, margins were impacted due to renovation expenses as well as increase in sales and marketing and payroll increase expenses.

The quarterly performance was also marred by lower operational inventory as 25% of Keys inventory was shut down for renovation. The management aims to complete renovation by FY26 post-which, ~5,800 rooms to be fully functional with increased average room rate by ~Rs 2,000.

Lemon Tree is optimistic on Aurika portfolio H2 FY25 to be two times of H1 FY25; expecting Aurika MIAL’s actual potential to start reflecting starting Q3 FY25.

We have cut our net sales/Ebitda estimates by 2%/2% and 8%/7% over FY25E/FY26E. Maintain Buy with a revised target price of Rs 150 (earlier Rs 162), assigning 17 times enterprise value/Ebitda to FY26E.

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