For Apr-Jun FY 2023, Lemon Tree Hotels has reported a consolidated revenue of Rs 1.9 bn, which is up 61% on-quarter. This is marginally higher than the ICICI Securities estimate of Rs 1.8 bn, with a reported EBITDA of Rs 0.9 bn and EBITDA margins of 45.6%.

Lemon Tree’s Q1FY23 ARRs increased 18% QoQ to Rs 4,822 while occupancy improved by 1,894 bps QoQ to 65.1%, leading to a RevPAR of Rs3,138 for the quarter (up 66% QoQ). Based on the strong recovery in demand from Mar-Jun ’22, the company had guided for FY23 consolidated revenue to grow 100% YoY to ~Rs8.0 bn, at a net EBITDA margin of 50%, which factors in cost inflation.

ICICI Securities retains its FY23-24E revenue and EBITDA estimates and maintains the BUY rating with an unchanged SoTP-based target price of Rs84/share, based on 20x Mar’24E EV/EBITDA. Key risks are prolonged impact of Covid on occupancies and room rates in FY22-23E. Going ahead, LTH’s occupancy and ADRs are expected to recover further in the remainder of FY23. The Aurika Mumbai Airport hotel is expected to commence operations in Q3FY24.

While there has been a faster-than-expected recovery in occupancies and multiple demand drivers in Q1FY23, heading into the remainder of FY23, ICICI Securities retains its FY23-24E revenue/EBITDA estimates, keeping room for any negative surprises driven by macro concerns over inflation and lower discretionary spends.