Lemon Tree up 4%; hits new high on launching its first hotel in Rajkot

In past two days, the stock has surged 11 per cent after as the company launched its first property in Rajkot, and the sixth property of the group in Gujarat.

Shares of Lemon Tree Hotels hit a new high at Rs 106.30, as they rallied 4 per cent on the BSE in Monday’s intra-day trade amid heavy volumes. In past two days, the stock has surged 11 per cent after the company announced launch its first property in Rajkot, and the overall sixth property in Gujarat.

At 11:24 AM; Lemon Tree Hotels was quoting 2 per cent higher at Rs 104.30, as compared to 0.37 per cent rise in the S&P BSE Sensex. The average trading volumes at the counter jumped three-fold today. A combined 16.82 million equity shares representing 2 per cent of total equity of the company had changed hands on the NSE and BSE.

Lemon Tree said the Rajkot hotel has 45 well-appointed rooms and suites complemented by a multi-cuisine coffee shop - Citrus Café, as well as a well-equipped fitness center and a refreshing swimming pool to keep guests feeling as fresh-as-a-lemon. A host of refreshing facilities and amenities, coupled with warm and friendly service make this hotel a preferred option for both business and leisure travelers as well as city dwellers.

Lemon Tree Hotels is one of the largest hotel chains in India on the basis of controlling interest in owned and leased rooms, the sixth largest by consolidated inventory, and the largest in the mid-market hotel sector. The company operates across the upscale, upper-midscale, midscale and economy segments, and delivers differentiated yet superior service offerings, with a compelling value proposition.

During the last one year, Lemon Tree has performed better than the industry in terms of growth and profitability. Going forward, addition of Aurika MIAL (its largest hotel having 669 rooms) coupled with the company’s five-year (CY24 to CY28) road map, has the potential to propel the next leg of growth for the company, according to Motilal Oswal Financial Services (MOFSL).

Aurika MIAL, which is likely to be operational by October, 2023, will be the biggest addition to Lemon Tree’s arsenal. The hotel will boost the company’s dynamics in the form of higher Average Room Rate (ARR), better margins and improved brand mix. The management’s five-year road map focusses on accelerated room additions (majorly management contracts), higher margin (~50 per cent) and better channel mix (64 per cent retail share), the brokerage firm said.

“FY23 was a robust year for the company and we expect the strong momentum to continue going forward, led by further improvement in occupancy on the back of a resilient demand scenario; an increase in ARR with the addition of Aurika MIAL; and strong addition of hotels under management contracts,” MOFSL said. It riterates BUY rating on the stock with a target price of Rs 115 (premised on FY25E SoTP).