Macquarie expects shares of this hotel stock to jump 56% citing multiple growth triggers

Brokerage firm Macquarie has projected a 56% upside on shares of Lemon Tree Hotels Ltd. on Wednesday, March 19, in comparison to their previous closing price.

The brokerage has an "outperform" rating on the stock with a price target of ₹210 per share. The stock ended the previous trade session at ₹134.3 apiece.

Macquarie said Lemon Tree has many levers of growth including an improvement in performance post the completion of renovation across its properties, a growing pipeline of orders, stabilisation of assets and management fees.

Shares of Lemon Tree hotels are currently trading at a discount when compared to their historical valuations and these multiples are likely to expand, Macquarie said, adding that at 1x price-to-earnings-growth ratio, Lemon Tree has the potential to double in value.

It said an additional upside could come from an expansion in Lemon Tree's multiples led by an increase in strategic value, potential M&A activity and an update on the IPO of Fleur.

Lemon Tree Hotels reported a 76.6% increase in its December quarter net profit at ₹62.5 crore from ₹35.4 crore in the previous year. Its revenue increased 22% to ₹355.2 crore, while its EBITDA was up 30.5% at ₹184.2 crore. The company's margin expanded to 51.9% from 48.7% in the year-ago period.

Of the 22 analysts that have coverage on the stock, 20 have a "buy" rating, one has a "hold" rating and another has a "sell" rating.

Shares of Lemon Tree Hotels are trading with gains for eight consecutive sessions. The stock was up 0.95% at ₹135.87 apiece at 9.30 am. However, it has declined 14.5% this year, so far.

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