Shares of Lemon Tree Hotels Ltd. have gained nearly 15% since the company announced its Q4FY22 earnings on May 27. The growth is despite poor earnings performance in the previous quarter. The Omicron-led disruption impacted its operations in the early part of the March quarter. Management said the company has around 86 per cent inventory in the business segment and around 40 per cent of old inventory in Gurgaon, Hyderabad and Bangalore. Consequently, it disappointed on key parameters as occupancy declined 967 basis points year-on-year and stood at 46.1% in Q4FY22. One basis point is 0.01%.
However, the demand outlook seems to be improving. In a call with analysts, the company’s management said, after the offices opened in late March, occupancy in key markets of Bangalore and Hyderabad stood at around 80%. Management expects consumption to reach pre-Covid levels by 1HYFY23. In addition, in fiscal 2013, management expects revenue to grow at least 100% and aims for a minimum net EBITDA of 50%. Ebitda is short for earnings before interest, taxes, depreciation and amortization.
On Thursday, the stock rose nearly 4% on the National Stock Exchange and is currently trading at Rs 68.10.
Analysts at Motilal Oswal Financial Services Ltd note that with improvement in corporate travel and resumption in international travel, the company is expected to see a strong growth as it derives around 86% of its business from the business segment.
“In FY2011, Lemon Tree operated 13 toddler hotels with 1,914 rooms, which accounted for 37% of its owned/leased room inventory. The performance of these rooms, which were in the stabilization phase, was affected by the pandemic Once normalcy is reached, stabilization will accelerate growth,” said the Motilal Oswal report.
Analysts at IDBI Capital Markets & Securities Ltd share the optimism, saying, “The company’s focus on adding inventory through management contracts, opening of Aurica, Mumbai and prudent cost optimization measures will pave the way for future earnings growth.” However, following a sharp jump in the share price, potential upside from current levels is limited, the IDBI report added.
Note that so far this calendar year, the stock is up nearly 40%, reaching a new 52-week high. 71.45 on NSE in April.