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Lemon Tree Hotels shares hit 10% upper circuit; rise for fourth straight session

Lemon Tree Hotels shares hit 10% upper circuit; rise for fourth straight session

Lemon Tree Hotels shares hit 10% upper circuit; rise for fourth straight session
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By Ankit Gohel  Aug 13, 2020 2:32:23 PM IST (Updated)

Shares of Lemon Tree Hotels were locked at 10 percent upper circuit on Thursday, gaining for the fourth day in a row. The stock surged 10 percent to Rs 32.25 per share on the BSE.

Shares of Lemon Tree Hotels were locked at 10 percent upper circuit on Thursday, gaining for the fourth day in a row. The stock surged 10 percent to Rs 32.25 per share on the BSE.

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The stock has been gaining on the back of multiple developments including better-than-expected operating profit in June quarter, the company's debut in Dwarka and bullish brokerage views. It has gained more than 35 percent in the last four sessions.
On Wednesday, Lemon Tree Hotels, through its management subsidiary Carnation Hotels Pvt. Ltd., announced its debut in Dwarka, Gujarat, with the launch of the 109-key hotel - Lemon Tree Premier, Dwarka.
Lemon Tree’s business was severely affected by the coronavirus-induced lockdown in the first quarter. Revenues fell 71.1 percent YoY to Rs 40.7 crore as only 71 percent of its inventory was operational.
Occupancy in operational hotels was at 40.4 percent, leading to an average occupancy of 28.9 percent for the quarter. The average room rates were also down 34.4 percent YoY to Rs 2626 per room.
EBITDA fell 90.2 percent YoY to Rs 4.4 crore in Q1FY21 from Rs 44.8 crore in Q1FY20 while EBITDA margin was at 10.7 percent versus 31.8 percent in the year-ago period.
However, EBITDA, even with 90 percent fall, was better than expected. Analysts had estimated a negative EBITDA or EBITDA loss. Despite the macro headwinds and low occupancy in the June quarter, the company posted a positive EBITDA of Rs 4.4 crore aided by cost-saving initiatives.
CLSA believes Lemon Tree’s cost rationalisation measures paid off with a 62 percent YoY decline in operating costs. A large part of this will be sustained and could expand its Ebitda margin by 500-700 bps once normalcy returns, as per the company.
While the company expects recovery in domestic travel to take at least 6-9 months, it is seeing a recovery in small corporate/MSMEs and retail demand for staycations in 2Q.
CLSA maintained 'Buy' rating on the stock with a target price at Rs 33 per share.
Motilal Oswal said that the company’s cost-saving initiatives have aided in achieving positive EBITDA. It has a 'Buy' rating on the stock with a target price of Rs 33.
ICICI Direct maintained a 'Hold' call on the stock with a target price of Rs 26 on near term challenges including weak industry dynamics.
Kotak Institutional Equities said the cost-reduction initiatives and positive EBITDA achieved by the company among others were positive for Lemon Tree. The brokerage has a 'Buy' call on the stock with a target price of Rs 35.
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