LEMONTREE - Lemon Tree Hotels Limited Share Price

In the earnings conference call held on May 30, 2025, management provided an optimistic outlook for Lemon Tree Hotels, highlighting robust growth in both revenue and EBITDA. For Q4 FY25, the company's revenue reached Rs.379.4 crore, a 15% increase year-over-year, while EBITDA grew 17% YoY to Rs.205 crore, resulting in a net EBITDA margin of 54%. The full-year total revenue stood at Rs.1,288 crore, a 20% increase from FY24, with an EBITDA of Rs.637 crore, mirroring the same growth percentage.

Management reaffirmed their confidence in achieving their five-year plan, aiming for a total inventory of 20,000 rooms by CY28. As of March 31, 2025, the company had already reached 85% of this goal and expects to add at least 3,000 rooms in the current financial year. The company also projected that the EBITDA margin would stabilize above 50% post-renovation expenses, which are currently elevated at 2.7% of revenue, anticipated to drop to about 1.2%-1.3% in the long term.

Key strategic initiatives include the relaunch of their loyalty program, Infinity 2.0, aimed at increasing their retail demand share from 45% in FY25 to their target of 66% by CY28. The management expects this program, combined with upgraded technology, to significantly enhance customer engagement.

Overall, management projected an internal target of at least 55% EBITDA margin by FY28, citing expected improvements in revenue flow-through as fixed and renovation costs stabilize post-investment. This optimistic guidance underscores management's belief in the company's growth trajectory and financial stability as it continues to expand its footprint in the hospitality sector.

Here are the main questions from the Q&A section of the earnings transcript along with detailed answers provided by the management:

Question: "Can you talk about the developments at Aurika Mumbai? What gives you confidence that you can raise the ARR to Rs. 11,000 - Rs. 12,000?"

Answer: "Aurika's retail pricing varies markedly; it can range widely based on demand. Currently, our focus has been on filling the hotel, achieving over 80% occupancy in Q4 compared to 65% last year. This foundation allows us to raise prices. We expect strong demand this winter, projecting the ARR reaching Rs. 11,000 - Rs. 12,000, especially with an EBITDA margin at around 67% indicating robust profitability already."

Question: "What steps will help you increase your retail share from 45% to 66%?"

Answer: "Retail demand largely relies on the increase in mid-market travelers in India. We aim to improve our loyalty program and enhance our direct booking website. With plans to capture more guests directly through loyalty benefits, we believe we can significantly increase retail share over the next 3-4 years as consumer behavior evolves toward hotel stays."

Question: "Are you targeting an EBITDA margin of 55% by FY28?"

Answer: "While we anticipate reaching an EBITDA margin closer to 55% by FY28, we aim for at least 50%. The focus is on managing expenses effectively, particularly after a period of heavy renovation investment, which will stabilize our margins."

Question: "Can you outline your debt repayment strategy moving forward?"

Answer: "We expect to generate Rs. 380 crore in cash this fiscal year while continuing a structured debt repayment, averaging Rs. 300 crore this year, increasing to Rs. 400 crore next year, supported by reduced CAPEX as renovations stabilize. This approach keeps us on track for being debt-free by 2029."

Question: "What will be the impact of renovations on hotel performance, particularly in relation to fewer managed rooms?"

Answer: "Renovations are carefully timed to minimize occupancy loss. Currently, we have renovated around 70% of our portfolio and expect to maintain demand through strategic scheduling. The net effect should enhance long-term performance, even if short-term disruptions occur."

Question: "What are your plans concerning international expansion beyond the Dubai property?"

Answer: "We consider international ventures opportunistically, aiming for asset-light growth primarily in regions frequented by Indian travelers. We foresee opportunities emerging over the next 3-5 years as the demand for Indian-branded hotels increases globally."

These questions and answers provide insight into the management's strategies and outlook for Lemon Tree Hotels, focusing on expansion, performance metrics, and financial strategies.