This hotel stock turns multibagger as shares rally 105% in a year
- The multibagger stock is up more than 72% in 2022 (YTD) so far
Shares of Lemon Tree Hotels Ltd surged more than 2% to ₹82 apiece on the BSE in Monday's early trading session. The hotel stock has been in an uptrend since the last few sessions and has turned multibagger by rising about 105% in a year's period, approaching its record high level.
The hospitality sector has been in the limelight and is seen outperforming broader markets. Hotel sector outperformance in FY22 was significantly driven by Indian leisure tourists due to Covid restrictions, who would have otherwise travelled abroad.
The favourable location of Lemon Tree's properties in prominent business and tourist districts supports revenue growth prospects and reduces concentration risk, as per analysts.
"With the opening of international borders to foreign tourists, we expect the hotel business in key cities like Mumbai and Delhi to also improve significantly. Lemon Tree is likely to be the key beneficiary of the same," said brokerage and research firm ICICI Securities in a note earlies this month.
Promoted by Patanjali Keswani, Lemon Tree (LTHL) is the largest hotel chain in the mid-priced segment in India. It operates 8,497 rooms in 87 hotels across 54 destinations in India and abroad under brands like Aurika (premium), Lemon Tree premier, Lemon Tree (midscale), RedFox (economy) and Keys. The multibagger stock is up more than 72% in 2022 (YTD) so far.
he company plans to add 738 rooms (669 rooms in Mumbai, 69 rooms in Shimla) over the next two years with total capex of ₹1,006 crore. Post completion of expansion, LTHL will be operating around 10,462 rooms in 105 hotels across 64 destinations, in India and abroad by FY24E.
ICICI Securities expects the company’s operating margin to scale up to 50% (highest in the Industry) over the next one year. “The company is well positioned to capture the unorganised market share due to slowdown in the upcoming room supply in the wake of ongoing distress. We believe the company’s large asset base, strategic partnership and financial flexibility would continue to support the liquidity profile, if further need arises,” it added in its note on September 7, 2022.
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