Lemon Tree - Scaling New Heights: Motilal Oswal

Motilal Oswal Report

Lemon Tree Hotels Ltd. is expected to benefit from the changing dynamics in its key markets such as National Capital Region (~24%/17% of FY23/FY26E consol. Revenue as per our estimates) and Mumbai (excluding Aurika Sky City, ~10% in FY23 and 29% in FY26E including Aurika MIAL).

Rising demand in these cities (which is accelerated by significant traction from new convention centers) and slower supply (~2-6% compound annual growth rate over FY23-28E) should propel the growth trajectory of existing players.

Aurika Sky City Mumbai, which is positioned as an upper upscale hotel, will be a key beneficiary of the trickling down of demand from the luxury segment. The hotel is expected to contribute to ~21%/23% of consolidated revenue/Ebitda by FY26.

Lemon Tree has a strong pipeline of ~3,354 managed rooms (~91% of operational managed rooms), which are expected to become operational by FY27, taking the share of managed rooms to ~55%.

We expect Lemon Tree to clock management fees of Rs 943 million by FY26 (~38% CAGR over FY23-26E).

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