This could be the better share of the Lemon Tree Hotels now opening up theme. The company’s business is getting better due to the relaxation in the restrictions of COVID 19.
Opening Up Theme Stocks: Hotel stock Lemon Tree Hotels has been trading in the consolidation phase for a long time. In the last 1 year so far this year, the stock has been trading flat, while even in one year, this stock has not shown growth even in double digits. The lockdown has had an effect on the company’s business. Although now it can be a better share of the opening up theme. The company’s business is getting better due to the relaxation in the restrictions of COVID 19. Both sales and EBITDA have been better than expected in the December quarter. There has also been a jump in revenue. Brokerage house Motilal Oswal is bullish on Lemon Tree Hotels and expects 41 per cent upside in the stock.
Benefit of opening up theme
The brokerage house says that currently 85 percent of Lemon Tree Hotels’ business comes from domestic travellers, but going forward the company is focusing on international travellers. It will further benefit from the spurt in international travel demand. In FY21, the company was operating 12 toddler hotels with room capacity as of 1914. Hotel room booking was affected due to the pandemic, but once again the occupancy rate is increasing. Room booking is picking up speed. Once the cases of COVID 19 will be normal, it is expected to get full benefit of the opening up theme. Although the brokerage house has reduced the EBITDA estimate for FY22E/FY23E to 14%/13%, but has given a target of Rs 68, advising to buy the stock.
20% cheaper than 1-year high
Lemon Tree Hotels is currently trading on the stock exchange at a price of Rs 48. Whereas the 1-year high for the stock is Rs 60. In this sense, it is available at a discount of 20 percent from the high of 1 year. The stock has grown only 9 percent in the last 1 year, while so far this year there has been a decline of around 1 percent. The stock has lost about 4 percent in 1 month.
Revenue increased on a yearly basis
Lemon Tree Hotels’ revenue grew 2.1x year-on-year in the December quarter. RevPAR growth has been 109 percent. Occupancy has improved by 15pp, while ARR has grown by 54 percent. EBITDA has grown by 3.2 times on a year-on-year basis. Demand recovery has been good during this period and stood at 3000 rooms per day in the December quarter. The company has not reduced the prices in any way. Management’s guidelines are strong and good growth is expected going forward.
(Disclaimer: Stock investment advice is given by the brokerage house. These are not the personal views of The Financial Express. Markets are risky, so take expert opinion before investing.)
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