LEMONTREE - Investment Analysis: Buy Signal or Bull Trap?
Back to ListInvestment Rating: 2.9
| Stock Code | LEMONTREE | Market Cap | 10,462 Cr. | Current Price | 132 ₹ | High / Low | 181 ₹ |
| Stock P/E | 97.3 | Book Value | 16.4 ₹ | Dividend Yield | 0.00 % | ROCE | 11.2 % |
| ROE | 8.33 % | Face Value | 10.0 ₹ | DMA 50 | 146 ₹ | DMA 200 | 151 ₹ |
| Chg in FII Hold | 0.05 % | Chg in DII Hold | -0.26 % | PAT Qtr | 22.6 Cr. | PAT Prev Qtr | 20.5 Cr. |
| RSI | 38.9 | MACD | -7.35 | Volume | 29,89,573 | Avg Vol 1Wk | 37,82,944 |
| Low price | 111 ₹ | High price | 181 ₹ | PEG Ratio | 0.96 | Debt to equity | 0.28 |
| 52w Index | 30.6 % | Qtr Profit Var | 16.5 % | EPS | 1.36 ₹ | Industry PE | 31.6 |
📊 Analysis: Lemon Tree Hotels trades at ₹132 with an extremely high P/E of 97.3 compared to the industry average of 31.6, indicating steep overvaluation. ROE (8.33%) and ROCE (11.2%) are modest, showing average efficiency in generating returns. The PEG ratio (0.96) suggests fair growth relative to valuation, but dividend yield is 0%, making it unattractive for income investors. Technical indicators (RSI 38.9, MACD -7.35) show bearish momentum. PAT has improved sequentially (20.5 Cr. → 22.6 Cr.), but overall earnings remain small relative to valuation.
💡 Entry Price Zone: Ideal entry would be between ₹115–₹125, closer to the 52-week low (₹111) and below the 200 DMA (₹151), offering better valuation comfort.
📈 Exit / Holding Strategy: If already holding, consider a medium-term horizon (2–3 years) only if earnings growth accelerates. Exit strategy should be triggered if price sustains below ₹115 or if ROE/ROCE fail to improve. Long-term holding is not recommended unless profitability metrics strengthen significantly.
✅ Positive
- Sequential PAT growth (20.5 Cr. → 22.6 Cr.).
- PEG ratio (0.96) indicates some balance between growth and valuation.
- Debt-to-equity ratio at 0.28, showing manageable leverage.
⚠️ Limitation
- Very high P/E (97.3) vs industry average (31.6).
- No dividend yield, unattractive for income investors.
- Weak EPS (₹1.36) relative to price.
📉 Company Negative News
- DII holdings reduced (-0.26%), showing reduced domestic institutional confidence.
- Trading volumes lower than weekly average, indicating weaker liquidity.
📈 Company Positive News
- FII holdings increased slightly (+0.05%), showing foreign investor interest.
- Consistent PAT growth quarter-on-quarter.
🏭 Industry
- Hospitality sector has cyclical growth tied to tourism and economic recovery.
- Industry P/E at 31.6 highlights Lemon Tree is trading at a steep premium compared to peers.
🔎 Conclusion
Lemon Tree Hotels is currently overvalued with modest return metrics and no dividend support. It is not an ideal candidate for long-term investment at current levels. Best strategy: wait for correction towards ₹115–₹125 before entry. Existing holders should monitor profitability and exit if fundamentals fail to improve.