ICICI Securities Maintains "Buy" On Hotels Stock, Sees Robust 75% Potential Upside

Renowned brokerage firm ICICI Securities in its recent report on Lemon Tree Hotels Ltd. (LTH) has assigned a "Buy" on the stock. The brokerage has revised the target price to Rs 132/share (earlier Rs 125/share), claiming a strong 76% upside from its current level. The stock has given positive returns over the past 3 years, however, it has fallen in the past week. It is a midcap hotel sector stock having a market capitalisation of Rs 5,937.89 crore.

Current Market Price, Returns, 52 Week Low and High

The stock of LTH last traded at Rs 75.10 apiece, down 1.20% as compared to its previous close. It recorded its 52 week low on 22 March 2022 at Rs 52.45 apiece, and 52 week high on 1 December 2022 at Rs 103.40 apiece, respectively.

The stock has given 1.96% negative return in the past 1 week. In the past 1 month, it has given 0.74% positive return and in the past 3 months, it has given 4.23% positive return. In the past 1 year, it has given 32.22% positive return and in 3 years it has given 187.19% positive return.

Focus shifts to growth from recovery, Buy for a target price of Rs 132/share

ICICI Securities has said, "Lemon Tree Hotels (LTH) clocked its best-ever quarter in Q3FY23, and with the company having achieved 9MFY23 revenue and EBITDA of Rs6.2bn and Rs3.1bn respectively, we believe that it is on track to meet its FY23 guidance of revenues 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 H2FY24 and d) focus on organic debt reduction from FY25E as pending capex of ~Rs5bn largely for Mumbai Airport hotel is completed by Mar'24."

It added, "We retain our FY23-24E estimates and raise our FY25E revenue and EBITDA estimates by 18% factoring in faster occupancy ramp-up for Aurika Mumbai Airport hotel and maintain our BUY rating with a revised SoTP-based target price of Rs132/share (earlier Rs125) based on 20x Mar'25E EV/EBITDA."

Key risks

Prolonged impact of Covid on occupancies and room rates and cost inflation.

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.