Q3FY21 Result Update - Lemon Tree Hotels - ICICI Direct

The performance of Lemon Tree (LTH) improved gradually in Q3FY21 vs. Q2. However, the same remained below our estimates. Revenues improved 43.6% QoQ to Rs. 68.4 crore. Higher demand for staycations, work from hotels led to rise in occupancy to 42.4% vs. 32.4% in Q2FY21. However, with a change in demand mix, average room rates were down 4.7% QoQ, 45.6% YoY to Rs. 2,538/room. Operational inventory increased from 86.8% in Q2 to 91.2% in Q3FY21. Total expenses were at Rs. 48.3 crore, down 59.2% YoY, up 22.9% QoQ. Sharp reduction in employee costs (down 62.5% YoY to Rs. 15.8 crore) and other cost (down 59.6% YoY to Rs. 27.1 crore) kept cost lower during the quarter leading to positive EBITDA for the quarter. However, with higher interest (Rs. 45.5 crore) and depreciation (Rs. 27.3 crore), the company reported net loss of Rs. 46.7 crore (vs. I-direct estimated net loss of Rs. 39.5 crore). Demand from retail & MSMEs from large corporates is witnessing gradual recovery. While we anticipate a gradual revival in corporate travel, leisure demand is already strong and this traction is expected to further increase in months ahead.

Valuation & Outlook

The ongoing crisis may lead to ~15% room inventory reduction, which augurs well for LTH in long run. However, near term earnings challenges along with high D/E remains key concern. We change rating from REDUCE to HOLD and revise TP to Rs. 44 (SOTP based) vs. earlier TP of Rs. 26/share.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_LemonTreeHotels_Q3FY21.pdf

Shares of Lemon Tree Hotels Ltd was last trading in BSE at Rs.43.75 as compared to the previous close of Rs. 41.95. The total number of shares traded during the day was 1025418 in over 4289 trades.

The stock hit an intraday high of Rs. 44.5 and intraday low of 41.7. The net turnover during the day was Rs. 45009861.

Source : Equity Bulls

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