Q2 earnings effect: Lemon Tree Hotels shares surge 7%; Axis Capital revises target

Lemon Tree Hotels Ltd shares jumped 7% in Thursday's trade as Axis Capital raised target price following the company's strong September quarter performance. The brokerage maintained its 'ADD' rating, citing healthy revenue growth, improved room occupancy and expansion in revenue per available room (RevPAR), although it flagged concerns over the pace of recovery in the mid-scale hotel segment.

Axis Capital raised its target price to Rs 130 from Rs 123, implying an upside of around 13% from the price considered in its report. The brokerage said Lemon Tree's revenue and Ebitda grew 18% and 22%, respectively, year-on-year (YoY) in Q2 FY27. The performance was supported by 18% growth in RevPAR, an 8% increase in average room rates (ARR) and a 633-basis-point improvement in occupancy to 76%.

Lemon Tree Hotels shares touched a high of Rs 123.30 on Thursday, up 7.17% from their previous close of Rs 115.05. The stock opened at Rs 117.45 and touched a low of Rs 117.25 during the session.

Axis Capital on Lemon Tree Hotels:

The brokerage noted that all of Lemon Tree's brands recorded double-digit growth during the quarter, while management fee income increased 30%. Ebitda margin also improved by around 150 basis points to 44%, according to the report.

However, Axis Capital remains cautious about a broad-based recovery in hotel demand. It said corporate demand has yet to revive, while the mid-scale segment continues to face challenges in translating the improvement in travel demand into stronger business. The brokerage maintained that the recovery in demand could remain gradual.

Axis Capital said the company's performance was supported by stronger room rates and occupancy, with the Keys portfolio also contributing to growth. It expects the company's operating performance to benefit from improving occupancy and higher management fee income, while keeping an eye on demand trends in the mid-scale category.

Lemon Tree Hotels Q2 results

Lemon Tree Hotels reported an 18% YoY increase in total revenue to Rs 363.8 crore for the September quarter. Net Ebitda rose 22% to Rs 162.2 crore, while net Ebitda margin expanded by 157 basis points to 44.6%.

The company's profit after tax (PAT) increased 90% YoY to Rs 79.8 crore. Revenue per available room (RevPAR) rose 18% to Rs 5,137, supported by an 8% increase in average room rates to Rs 6,751 and a 633-basis-point rise in occupancy to 76.1%.

Commenting on the performance, Lemon Tree Hotels Managing Director Neelendra Singh said, "Q2 has been a strong quarter for Lemon Tree Hotels, with our highest-ever Q2 revenue, Ebitda and profitability." The company also said it signed 11 managed and franchised hotels with 825 rooms and opened eight hotels with 523 rooms during the quarter.