1. At a Glance
Over FY21–25, Lemon Tree Hotels grew revenue at a 14% CAGR and net profit at a 207% CAGR as it scaled to 112 hotels (10,317 rooms). ROCE climbed from 5% to 13%, but the stock trades at 62× FY25 EPS of ₹2.48. Our fair-value band: ₹37–₹50, based on 15–20× EPS.
2. Introduction with Hook
- Picture a mid-priced hotel group in boom-town India: every GM dreams of 80% Occupancy, but Lemon Tree had to wrestle with lockdown ghosts.
- From FY20’s COVID trough—losses of ₹ 13 cr—to FY25’s profit of ₹ 243 cr, it’s been check-in, check-out, repeat… with drama at every turn.
- Yet at ₹ 153/share today, you’re paying for pent-up demand that may already be spent.
3. Business Model (WTF Do They Even Do?)
- Three Brands:
- Aurika (upscale)
- Lemon Tree (upper-midscale & midscale)
- Red Fox (economy)
- Asset-Light Mix: Majority leased or managed; capex-light growth via franchise/joint ventures.
- Geography: 112 hotels across 50+ Indian cities plus 3 international (Bhutan, Nepal, Dubai).
- Value Proposition: “Stylish stay at sensible rates”—targeting business and leisure travellers seeking ₹ 2,500–₹ 6,000 room rates.
4. Financials Overview – Profit, Margins, ROE, Growth
| Metric | FY21 | FY25 | 5-Yr CAGR |
|---|---|---|---|
| Sales (₹ cr) | 402 | 1,286 | +36% |
| Net Profit (₹ cr) | –187 | 243 | +207% |
| OPM (%) | 23 | 49 | +26 pp |
| ROCE (%) | 1 | 13 | +12 pp |
| ROE (%) | –1 | 18 | +19 pp |
• Revenue rebound from ₹ 402 cr in FY21 to ₹ 1,286 cr in FY25—led by new openings and occupancy recovery.
• Margins soared as fixed-cost leverage kicked in: OPM jumped from 23% to 49%.
5. Valuation – Is It Cheap, Meh, or Crack?
- EPS FY25: ₹ 2.48
- Current P/E: 61.9× (₹ 153 / ₹ 2.48)
- Peer P/E Range: EIH ~31×, Indian Hotels ~63×, ITC Hotels ~76×.
- Fair Value Band (15–20× EPS):
- Low end: 15 × ₹ 2.48 = ₹ 37
- High end: 20 × ₹ 2.48 = ₹ 50
- Verdict: Trading at ~62× feels like booking a penthouse at economy rates—expectation baked in, little margin for softness.
6. What’s Cooking – News, Triggers, Drama
- New Sign-Ups: Two Maharashtra hotels (67 & 100 rooms) in July 2025—small boost, but incremental.
- Volume Spikes: Exchange sought clarifications on Jul 9; company assured “no undisclosed info.”
- Management Shuffle: Three senior roles reclassified end-Jun 25—minor noise but watch execution.
- International Push: Bhutan & Nepal franchises showing 70% occupancy—templates for future expansion.
7. Balance Sheet – How Much Debt, How Many Dreams?
- Borrowings: ₹ 2,148 cr vs ₹ 2,336 cr in FY24—modest deleveraging.
- Reserves: Jumped from ₹ 175 cr (FY24) to ₹ 372 cr (FY25), shoring up rainy-day fund.
- Liabilities: Total ₹ 4,082 cr vs ₹ 4,028 cr—stable gearing.
- Fixed Assets: ₹ 3,569 cr invested in properties, CWIP, branding.
8. Cash Flow – Sab Number Game Hai
| Cash Flow | FY24 (₹ cr) | FY25 (₹ cr) |
|---|---|---|
| Operating | +465 | +542 |
| Investing | –397 | –127 |
| Financing | –59 | –392 |
| Net | +10 | +22 |
• Operating CF jumped to ₹ 542 cr as hotels filled up.
• Investing CF pullback reflects fewer new projects in CWIP.
• Financing outflow driven by debt repayments and no dividends.
9. Ratios – Sexy or Stressy?
| Ratio | FY21 | FY25 |
|---|---|---|
| Debtor Days | 26 | 22 |
| Inventory Days | n/a | n/a |
| Payables Days | 807 | 295 |
| Cash Conversion Cycle (days) | –668 | –206 |
| Working Cap Days | –42 | 23 |
• Negative CCC in early years (long supplier credit) has moved toward positive—but still financing growth.
10. P&L Breakdown – Show Me the Money
- Revenue Split FY25: Room revenue ~65%, F&B ~25%, others (banquets, spa) ~10%.
- Cost Structure: Employee ₹ 300/cr, utilities ₹ 150/cr, rentals/lease ₹ 200/cr.
- Other Income: ₹ 2 cr—immaterial.
- Interest + Depreciation: ₹ 340 cr combined—significant given asset base.
11. Peer Comparison – Who Else in the Game?
| Company | CMP (₹) | P/E | ROCE | MCap (₹ cr) |
|---|---|---|---|---|
| Indian Hotels Co | 735 | 63 | 17 | 104,700 |
| EIH | 377 | 31 | 23 | 23,623 |
| Lemon Tree Hotels | 153 | 62 | 13 | 12,164 |
| Chalet Hotels | 858 | 132 | 11 | 18,775 |
• Lemon Tree’s ROCE trails EIH but matches Indian Hotels; P/E sits in the premium camp.
12. Miscellaneous – Shareholding, Promoters
- Promoters: 22.34% (gradual dilution from 23.93% in FY21).
- FIIs: ~20.9%; DIIs: ~19.7%; Public: ~37.0%.
- KMP Changes: Watch new COOs and CFO transitions post-June 2025 reclassifications.
13. EduInvesting Verdict™
Lemon Tree’s bounceback from COVID losses to healthy profits is worthy of applause—but the valuation landscape demands caution. At ₹ 153/share, you’re paying for perfection in occupancy and rate hikes. If travel hiccups or competitive undercuts emerge, those rosy 62× multiples could wilt fast.
✍️ Written on July 12, 2025
Tags: Lemon Tree Hotels Ltd, 5-Year Recap, Hospitality, Fair Value, Financial Analysis
