Lemon Tree Hotels (LEMONTRE IN) – Event Update – Value unlocking on the cards – Upgrade to ‘BUY’
Published on 15 Jan 2026
We upgrade LEMONTRE IN to “BUY” (earlier “HOLD”) with a SoTP based TP of Rs185 (earlier Rs174) as strategic re-organization of the business has potential to unlock value for shareholders. As a part of the restructuring exercise, 1,563 operating rooms of Lemon Tree will be transferred to Fleur. Consequently, Lemon Tree will emerge as a pure-play asset light entity whereas Fleur will evolve as a hotel ownership platform. Post the re-organization, Lemon Tree will manage a) 39 hotels with 5,556 rooms of Fleur along-with 2 under-construction hotels with 256 rooms, b) 89 operational hotels with 6,011 rooms owned by 3rd party players, and c) existing future pipeline of 127 hotels with 9,414 rooms. We believe the fee income business has a potential to command higher multiple as it will be asset-light, debt free, capital efficient and margin lucrative (flow-through to EBITDA is 70%+). On the other hand, the asset heavy business will witness a fund infusion up to Rs9.6bn from Warburg Pincus that can act as a growth capital. We value Lemon Tree (fee income business) at 30x-Sep 27E EBITDA and Fleur (asset-ownership business) at 24x Sep-27E EBITDA to arrive at a SoTP based TP of Rs185. Upgrade to “BUY”.
