Lemon Tree Hotels: PAT up by 39%; Accumulate

AUM CAPITAL | April 8, 2019, 8:57 p.m.

Recommendation

LTH is well poised to capitalize on the changing industry dynamics on the back of a very large inventory of rooms moving towards steady state, robust room demands on the back of planned conferences & events in the coming quarters and its cost leadership in driving higher revenues. Higher revenues, together with a relatively muted increase in costs and high operational leverage, are expected to lead to strong growth in EBITDA. Expectation of better price hikes going forward will result in robust RevPAR growth. Although the net debt-to-equity ratio is expected to rise with sustained capex, the sharp rise in operating income will help maintain a comfortable interest coverage ratio. Considering the huge opportunity in the sector and the positioning of LTH, one can Accumulatethe stock for medium to long term investment horizon.



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