Lemon Tree Hotels stock was trading 9.39% higher at Rs 129.85 on Tuesday compared to its previous closing price. The mid-cap hospitality stock has been rising after the company posted strong Q2 FY24 results and gave a positive outlook despite concerns over a global slowdown.
Lemon Tree Delivers Strong Q3 Performance
Lemon Tree Hotels reported a consolidated net profit of Rs 22.65 crore in Q2 FY24, registering a growth of 73% year-on-year (YoY). Lemon Tree Hotels’ revenue from operations stood at Rs 227.2 crore in Q2 FY24, which was up 2.2% from Rs 222.3 crore in Q2 FY23.
The company’s total revenue for the quarter stood at Rs 230.1 crore, which was higher by 15% compared to Q3 FY20.
The hotel-level revenue from the owned portfolio increased by 15% year-on-year on a same-store basis, while the network revenue for Lemon Tree, which is the total system revenue of owned and managed/franchise hotels, increased by 17% year-on-year.
The positive financial performance in Q2 FY24 reflected a strong period for the company. For more detailed information, you can refer to the official announcements and disclosures on the Lemon Tree Hotels website.
“The environment continues to be challenging with inflation eating away disposable income and discretionary spend. In spite of this, there are green shoots of demand recovery visible now,” said Patanjali Keswani, Chairman and Managing Director.
Outlook Remains Strong Despite Global Headwinds
Despite concerns over a global slowdown and recession worries in the US and Europe, Lemon Tree Hotels remains confident of strong demand recovery going ahead. The hospitality sector is coming out of COVID-induced stress faster than earlier expected.
We continue to focus on operational excellence by keeping costs under stringent control. The company has reached overall pre-COVID occupancy and Average Room Rates (ARR) levels, Keswani said.
Lemon Tree Hotels expects demand to accelerate further in the coming summer season. Rising occupancy rates and room tariffs will lead to higher revenue and profitability in FY24.
Stock Surges After Q4 Beat
Lemon Tree Hotels share price has surged nearly 10% to Rs 129.85 after its earnings beat estimates. The stock has been rising for the last three days after the Q4 results.
As per analysts, Lemon Tree Hotels valuations remain attractive considering its growth prospects in the next 2-3 years. The stock is trading at a P/E ratio of 68.53x compared to the sector average of 35x.
16 Analysts Bullish on the Stock
There are 16 analysts covering Lemon Tree Hotels stock with 10 strong buy ratings and 4 buy ratings after the Q4 performance. Only 1 analyst has a sell rating on the stock.
Analysts are positive due to the company’s industry-leading growth, strong balance sheet and high operating leverage. Occupancy rates and ARRs are expected to reach pre-COVID levels by FY24.
Capex intensity will also decline significantly from FY24, leading to strong free cash flows.
Promoter Holding at 23%, MF and FII Holding Increases
Lemon Tree Hotels has a promoter holding of 23.28% while 76.64% is public shareholding. Mutual fund holding in the company increased to 0.89% in Sep 2023 quarter from 0.86% in Jun 2022 quarter.
Meanwhile, FII holding in Lemon Tree hotels reduced marginally to 24.82% in Sep 2023 quarter from 25.35% in previous quarter. But FIIs are expected to increase exposure considering the positive outlook.
In summary, Lemon Tree Hotels stock offers long-term growth potential as demand recovers in the hospitality sector. The Q4 beat, strong outlook by management and high analyst ratings make it an attractive pick in the mid-cap space.