If you as an investor would have bought Lemon Tree shares worth Rs 1 lakh when it hit its all-time low of Rs 13.8 on May 21, 2020, your investments today would be worth Rs 8 lakh and counting.
Shares of Lemon Tree Hotels gained for the third straight day on Monday to hit an all-time high of Rs 106, which is over 8x its Covid-19 low in 2020. The stock is up over 23 percent so far in 2020 after an 85 percent surge in 2022 and a 16 percent gain in 2021.
The hospitality chain Lemon Tree had opened its first hotel with 49 rooms in May 2004 and currently operates around 8,600 rooms in 92 hotels across 58 destinations.
The company reported a profit after tax (PAT) of Rs 27.5 crore in the June quarter of 2023-2024, up 103 percent from Rs 13.6 crore in the year-ago period, driven by strong travel demand.
In an interview to CNBC-TV18 in August, Lemon Tree Hotels chairman and managing director Patanjali Keswani said that the hotel chain’s occupancy level had crossed 70 percent in the June quarter and the company hopes to do significantly better in the September quarter, accompanied with a price hike.
“We intend to average out at an occupancy of about 74 percent and take prices up by another 10-15 percent depending on market conditions in the December quarter and perhaps another 5 percent in March quarter next year. So, really overall about 20 percent by Q4 on a running basis,” Keswani had said.
Earlier in May, Keswani said that Lemon Tree Hotels expects to open over 20 hotels and add about 2,000 rooms during fiscal year 2023-2024.
"Lemon Tree is a stock with Rs 7,000 crore market capitalisation and Rs 1,700 crore of debt and now with tariff rates going to increase, more traction, more occupancy and this is where possibly in one and half two years it can become a debt free company also. So this is where more alpha can be generated from such kind of stocks going forward in the market," Amit Gupta of ICICI Securities PMS said.
Brokerage firm CLSA maintained its buy rating on Lemon Tree with a price target of Rs 115. The note said that Lemon Tree expects a strong ramp-up in earnings in financial year 2025 with an operating profit contribution of Rs 170 crore from the Aurika Mumbai Hotel and Rs 75 crore from management contracts.
Shares of Lemon Tree Hotels are trading 3.2 percent higher at Rs 105.40. Out of the 17 analysts that track the stock, 15 have a buy recommendation, while two have a sell rating.
Brokerage firm ICICI Securities has the highest price target on the street for Lemon Tree with Rs 137 per share, followed by Ambit Capital with Rs 130. Consensus estimates still project a further 10 percent upside for the stock.
First Published: Aug 21, 2023 12:54 PM IST
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