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Shares of Lemon Tree Hotels have been hitting their 52-week highs in recent times as the fears of Covid ease and pent-up demand gives a fillip to the hospitality sector.
The stock hit its 52-week low of ₹42.10 on November 29, 2021, and is now it is 118% up from that level.
Lemon Tree Hotels posted a consolidated net profit of ₹13.9 crore for the June quarter (Q1FY23) as against a net loss of ₹40.1 crore in the same quarter of last year.
The revenue from operations for the first quarter of FY2023 was ₹192.3 crore against ₹44.3 crore, an increase of nearly 334.08% year on year.
The stock looks poised for gains owing to favourable fundamentals. However, technical charts are showing some signs of exhaustion.
Fundamental view
Brokerage firm: Anand Rathi Share and Stock Brokers
The brokerage firm expects Lemon Tree Hotels’ Q2FY23 to be on similar lines as in Q1, as it sees demand rising. International travel returning would further benefit it in the coming months.
"Lemon Tree is set to open its largest hotel, Aurika (669 rooms), Mumbai (MIAL) by end-CY23 (construction on track) nearly 13% of its current inventory. Therefore we incorporate Aurika, and MIAL, and introduce our FY25 estimates, anticipating the company to report revenue, EBITDA CAGRs of 47% and 71%, respectively, over FY22-FY25," Anand Rathi said.
The brokerage firm has a buy call on the stock with a target price of ₹110.
"We raise our target price to ₹110 from ₹85 earlier, valuing the stock at 18 times FY25e EV/EBITDA from 20x FY24 EBITDA," said the brokerage firm.
Technical view
Analyst: Vaishali Parekh, Vice President - Technical Research, Prabhudas Lilladher
The stock has witnessed a decent bull run in recent times with a breakout indicated above the 86 zone and has entered new territory with a strong positive bias.
The analyst believes some exhaustion is possible as all the indicators are in highly overbought zones and a short correction in the coming days cannot be ruled out.
"The near-term support can be at ₹85-86 levels and only a decisive breach below ₹82 would change the trend and indicate a weak bias for profit booking. With the trend going strong from here on, one can expect the next visible targets of ₹105-110 provided the ₹85-86 zone is sustained in the short-term time horizon," said Parekh.
Analyst: Jigar S. Patel, Senior Manager - Equity Research, Anand Rathi Share and Stock Brokers
Although the counter is looking lucrative at this point in time, it is near its resistance zone of ₹91.5- ₹92.5.
Also, volume is dropping as price increases, which is an anomaly with respect to volume price analysis. On the Indicator front, the weekly MACD is overstretched which is a sign of exhaustion.
"One can book some profits at the current levels and other higher levels (i.e ₹93-94) if achieved. Fresh buying as of now is not advised," said Patel.
According to a MintGenie poll, an average of 12 analysts have a ‘buy’ call on the stock.
Disclaimer: The views and recommendations given in this article are those of individual analysts and broking firms. These do not represent the views of MintGenie.
