LEMONTREE - Fundamental Analysis: Financial Health & Valuation

Last Updated Time : 20 Dec 25, 11:15 pm

Fundamental Rating: 3.2

📊 Core Financials

• Quarterly PAT increased from ₹20.5 Cr. to ₹22.6 Cr. (+16.5% growth, showing earnings momentum).
• ROCE at 11.2% and ROE at 8.33% indicate modest efficiency.
• Debt-to-equity ratio at 0.28 reflects manageable leverage.
• EPS at ₹1.36 is low relative to current valuations.

💹 Valuation Indicators

• P/E Ratio: 118 (extremely high vs. industry PE of 34.1, suggesting severe overvaluation).
• P/B Ratio: ~9.8 (CMP ₹160 / Book Value ₹16.4).
• PEG Ratio: 1.17 (reasonable, but valuations remain stretched).
• Intrinsic Value: CMP appears far above fair value, limited margin of safety.

🏢 Business Model & Competitive Advantage

• Lemon Tree Hotels operates in mid-market hospitality, focusing on affordable yet quality accommodations.
• Competitive advantage lies in strong brand recognition, wide presence across India, and cost-efficient operations.
• Expansion in business and leisure travel segments supports long-term demand.

📈 Entry Zone & Long-Term Guidance

• Entry Zone: Attractive near ₹130–₹145 (closer to DMA 200 at ₹153 and 52-week low ₹111).
• Long-Term Holding: Suitable for investors seeking hospitality exposure, but valuations are expensive at current levels.

✅ Positive

• Quarterly PAT growth (+16.5%) shows earnings momentum.
• Debt-to-equity ratio at 0.28 ensures balance sheet stability.
• FII holdings increased slightly (+0.12%), showing foreign investor confidence.

⚠️ Limitation

• Extremely high P/E (118) compared to industry average (34.1).
• ROE at 8.33% and ROCE at 11.2% are modest.
• EPS at ₹1.36 is low relative to price levels.

📉 Company Negative News

• DII holdings reduced (-0.27%), reflecting cautious domestic sentiment.
• Stock trading close to 52-week high (₹181), limiting immediate upside potential.

📈 Company Positive News

• Quarterly PAT rose to ₹22.6 Cr. from ₹20.5 Cr.
• FII holdings increased slightly, showing foreign investor confidence.
• Strong demand outlook in hospitality sector with rising travel and tourism.

🏭 Industry

• Hospitality industry benefits from rising domestic tourism, business travel, and urbanization.
• Industry PE at 34.1, showing Lemon Tree trades at a massive premium to peers.

🔎 Conclusion

Lemon Tree Hotels demonstrates growth momentum and strong brand presence in mid-market hospitality. However, valuations are extremely stretched with a P/E of 118 and modest ROE/ROCE. Entry is advisable near ₹130–₹145 for better risk-reward. Long-term investors may benefit from hospitality sector growth, though cautious accumulation is recommended due to premium valuations and limited profitability metrics.