MOSL: LEMON TREE (Buy)- Strategy in place, but execution remains key
LEMON TREE: Strategy in place, but execution remains key
(LEMONTRE IN, Mkt Cap USD0.6b, CMP INR53, TP INR75, 41% Upside, Buy)
LEMONTRE hosted an analyst meet at its recently launched hotel – Lemon Tree Premier in Mumbai. The company shed light on its execution strategy and addressed investor concerns regarding debt. Key insights highlighted below:-
Besides synergies, Keys’ acquisition to help add rooms via management contract
- While LEMONTRE's acquisition of 'Keys Hotel' brings with it synergistic benefits (both on cost and revenue front), the deal is also expected to aid room addition under management contract. Hotel enquiries that did not qualify under LEMONTRE's existing brands can now be considered under the Keys brand; thus, paving the way for LEMONTRE to add hotels in a slightly lower category without diluting its existing brands.
- Post-acquisition, while most Keys hotels would operate under the existing brand name, a few will get rebranded as LEMONTRE hotels, which management believes would require capex of INR150m.
- LEMONTRE is confident of achieving an immediate 4% revenue improvement coupled with 2% cost decrease (of sales) post acquisition.
Lemon Tree Hotels Ltd is an India-based company, which operates a chain of upscale business and leisure hotels. The Company is engaged in acquiring land, building, leasing, owning, managing and marketing hotels. The Company offers three brands across various levels, that include Aurika Hotels and Resorts in Upscale; Lemon Tree Premier and Keys Prima in the upper midscale segment; Lemon Tree Hotels and Keys Select, in the midscale segment; and Red Fox Hotels and Keys Lite by Lemon Tree Hotels in the economy segment. Lemon Tree hotels are located across India, in metro regions, including the Mumbai, Bengaluru, Kolkata, Hyderabad and Chennai, as well as tier I and tier II cities such as Pune, Ahmedabad, Chandigarh, Jaipur, Udaipur, Indore, Vijaywada and Aurangabad.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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