Lemon Tree reported a weak set of Q2FY21 numbers amid the ongoing pandemic environment. However, the company managed to report EBITDA though at negligible level due to stringent cost control measures initiated during the quarter. Revenues for the quarter fell 68.8% YoY to Rs. 47.6 crore (vs. I-direct estimate of Rs. 52 crore) as only 86% of the company's inventory was operational. Occupancy in operational hotels was at 37.3% leading to average occupancy of 32.4% for the quarter (down 4240 bps YoY, up 347 bps QoQ). Average room rates were also down 35.6% YoY to Rs. 2,654/room (up 1.1% QoQ). Total expenses were at Rs. 39.3 crore in Q2FY21, down 62.3% YoY, up 8.3% QoQ. Sharp reduction in employee costs (down 61% YoY to Rs. 14.3 crore) and other cost (down 60% YoY to Rs. 12.2) kept cost lower during the quarter leading to company reporting EBITDA of Rs. 8.3 crore (I-direct estimate: Rs. 7.7 crore). With a sharp increase in interest costs (up 41% YoY to Rs. 49.7 crore), the company reported a net loss of Rs. 53.6 crore (vs. I-direct estimated net loss of Rs. 56.2 crore).
Valuation & Outlook
The ongoing crisis is expected to lead to ~15% room inventory reduction, auguring well for LTH in the long run. However, near term challenges with respect to weak industry dynamics and high D/E remain key concern for the company. Hence, we maintain our HOLD rating with a revised target price of Rs. 32/share (SOTP based valuation).
For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_LemonTreeHotels_Q2FY21.pdf