Lemon Tree Hotels - Q4FY21 First Cut - ICICI Direct

(CMP: Rs. 42; MCap: Rs. 3,328 crore)

The performance of Lemon Tree improved sharply during Q4FY21 vs Q3 and the same remained above our estimates.

Q4FY21 Earnings Summary

- Revenues for the quarter grew 39.1 % QoQ to Rs. 95.1 crore (vs. I-direct est: Rs. 64.5 crore) that was also backed by improved demand for weddings, staycations, and social events during the fourth quarter

- Operating inventory increased from 91.2% of total inventory in Q3 to 93.4% in Q4 FY21 backed by improved demand. Occupancy on full inventory improved from 42.4% in Q3 FY21 to 56% in Q4 FY21

- Concerted focus on cost management across verticals led to a drop of 40.7% YoY in total expenditure to Rs. 66.6crore, while it was up 37.8% QoQ

- Company reported EBITDA of Rs. 28.5 crore (I-direct est: Rs. 19.7 crore). The resultant EBITDA margin came in at 30% vs 29.4% reported last quarter and 36.3% last year

- However, with higher interest (Rs. 44.5 crore) and depreciation (Rs. 26.1 crore), company reported net loss of Rs. 26.7 crore (vs I-direct estimated net loss of Rs. 45.4 crore)

- Gross debt at the end of FY21 stood at Rs. 1,685 crore and after adjusting for about Rs. 141 crore cash, net debt was Rs. 1544 Cr. The average cost of borrowings has reduced 130bps YoY to 8.3%

- During the quarter, the company has expanded managed hotels vertical through new launches in the domestic market such as Bhubaneswar, Aligarh and Vijayawada. It has also signed a License Agreement for an upcoming hotel at Biratnagar. Further, Lemon Tree has allocated around 6 hotels to various hospitals in Gurugram, Delhi, Bengaluru, and Hyderabad for treatment of mild Covid patients due to influx of second wave during April-June period

Given the increasing consumer inclination for hygiene and safety, there would be a structural shift towards a preference for branded hotel players. This should drive consolidation in the domestic space, and that would bode well for organized and branded players, including Lemon Tree Hotels in the medium to longer term. Moreover, as Covid cases across the country subside and with vaccination drives expected to accelerate in the coming months, we expect the demand environment to improve. This should help drive a gradual and sustainable uptick in performance for entire branded hotel space including Lemon Tree hotels. We would be coming up with a detailed report soon post the conference call.

Shares of Lemon Tree Hotels Ltd was last trading in BSE at Rs.42.25 as compared to the previous close of Rs. 42.05. The total number of shares traded during the day was 397681 in over 2641 trades.

The stock hit an intraday high of Rs. 43.2 and intraday low of 41.05. The net turnover during the day was Rs. 16753494.

Source : Equity Bulls

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