MOSL: LEMON TREE HOTELS (Buy)-ARR growth and new hotels drive revenue
Lemon Tree Hotels: ARR growth and new hotels drive revenue; Growth to accrue post stabilization of hotels
(LEMONTRE IN, Mkt Cap USD0.8b, CMP INR74, TP INR91, 23% Upside, Buy)
- In-line revenues; miss on EBITDA: 4QFY19 revenue grew 14% YoY to INR1,505m (our est. INR1,571m), with EBITDA margin expansion of 360bp to 32.5% (our est. 35.2%). EBITDA stood at INR489m, up 28% YoY; Adj. PAT stood at INR325m (our est. INR151m), up 2.9x YoY. In FY19, revenue/EBITDA/adj. PAT grew 13%/24%/273% YoY to INR5.5b/ INR1.7b/ INR529m.
- Higher cost at new hotels impacts EBITDA growth momentum: ARR during 4QFY19 grew 4% YoY (to INR4,405) with occupancy improvement of 32bp to 77.6% (on same hotel basis, occupancy improved 330bp to 80.7%). This, along with new hotels led to 14% revenue growth. However, recently launched LTP (Pune)/RFH (Dehradun) operating at ~33%/~50% occupancy in FY19 dragged EBITDA growth; operational expenses grew 8.3% of which 8% was due to commencement of new hotels. In FY19, ARR grew 7.3% YoY to INR4,180 with occupancy improvement of 48bp to 76.3%.
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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