The share price of Lemon Tree Hotels surged 3.5% to ₹79.30 apiece during Friday's trade after the company signed a license agreement for a 60-room property in Sri Ganganagar, Rajasthan.
With this, the stock has extended its rally to 5.87% from Monday's low.
The company expects the property to be operational by July 2026 and said it will be managed by Carnation Hotels Private Limited, a wholly owned subsidiary and the management arm of Lemon Tree Hotels Limited.
"We are happy to announce our expansion in Rajasthan with our valued partner, Fort Rajwada Hotels. We already have six operational hotels in the state and another four upcoming in Jaipur, Kumbhalgarh, Banswara, and now Sri Ganganagar," said Mahesh Aiyer, CEO of Carnation Hotels Private Ltd.
"The state's warm hospitality, delicious food, and rich history are a great draw for tourists. Given Rajasthan’s immense tourism and business potential, we are looking at adding more hotels and resorts in the state to our existing portfolio," he added.
Meanwhile, the company signed a license agreement for a 47-room property in Bhopal, Madhya Pradesh last month. It expects the property to be functional by December 2023.
Lemon Tree Hotels is one of the largest hotel chains in India on the basis of controlling interest in owned and leased rooms, the sixth largest by consolidated inventory, and the largest in the mid-market hotel sector.
The company currently operates 8,350 rooms in 87 hotels across 53 destinations, and is expecting the current pipeline to become operational by CY 2024/25, at which point it will be operating 11,450 rooms in 126 hotels across 81 destinations, LTHL said in an exchange filing.
In the last one-year period, the company shares delivered a fabulous return of 49%, climbing from ₹52.80 apiece to the current price of ₹78.50.
The company reported a significant increase in its consolidated net profit to ₹48.6 crore in Q3FY23, a 151% QoQ jump, and a 338% increase compared to Q3FY20. The total revenue for the quarter increased 19% sequentially and 15% from Q3 FY20.
On consolidated levels, the occupancy rate during the quarter was at 67.6%, and the gross average revenue rate (ARR) stood at Rs. 5,738, which is the highest ever since listing and 24% higher than the same quarter pre-pandemic (Q3 FY20). The RevPAR was ₹3,877, up 19% QoQ and 17% year on year.
Q3FY23 was the best-ever quarter for the company, with most key metrics such as gross ARR, total revenue, operating profit, EBITDA margin, PBT, and PAT growing significantly.
Following the Q3 performance, HDFC Securities has retained its "buy" call on the stock with a target price of ₹108 apiece. The brokerage expects the company to post strong numbers in the upcoming quarters given the strong demand in the industry.
In the recent Union Budget, the government announced the "Dekho Apna Desh" initiative to promote domestic tourism. Under this scheme, a total of 50 destinations in the country will be selected through challenge mode. This bodes well for the hospitality sector going forward.
12 analysts polled by MintGenie on average have a 'strong buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
