Lemon Tree Hotels Stock hinge of an expensive make -up

Copyright © HT Digital Streams Limit all rights reserved. Lemon Tree opened Aurika, Mumbai Skycity, one of the largest hotels in India, in October. Photo: Lemon Tree Hotels Summary Lemon Tree spends about 6% of its income to renovate thousands of rooms. This upgrade will keep the costs high and cover the margins in the short term, which may be limited upside down for the rich valued stock. Lemon Tree Hotels Ltd Stock hit a fresh high of 52 weeks of £ 174.90 on Monday, partly due to optimism around its Aurika expansion plans. The company recently won a Delhi Development Authority for licensing rights on a 2.25 hectare of large land in Nehru Place, New Delhi, to build a five-star hotel. Lemon Tree is also in the thickness of a makeup, thousands of rooms renovated and prepared to turn off its asset-heavy poor, Fleur hotel. The renovation is a daring and expensive shift, which vomits about 6% of the income, with large properties in Delhi, Hyderabad and Bengaluru. Almost two-thirds of the 4300 rooms to be upgraded, which consists of about 40% of its operational keys, have been renovated in the past two to two and a half years, with the rest completed by October 2026. The result of the near term is higher costs and disrupted occupation, although expenses it would have broken up to 2-2.25% of revenue. Total spending in FY26 is expected to be around £ 130, including £ 80-90 crore operating expenses. Q1 Performance Lemon Tree’s June Quarter (Q1FY26) was decent. Consolidated turnover rose 18% year -on -year, with an average room tariff (ARR) by 10% to £ 6.236 and 600 basis points (BPS) to 73%. Thus, revenue per available room (revpar) grew by 19%. The operating margin increased by 160 bps to 44.5%, as the renovation costs were counteracted by lower power and fuel costs and payroll costs. Aurika Mumbai illustrates the payout. The occupation rose from 46% to 76% in the first quarter when renovated stock came up. The focus is now shifting after raising ARR by targeting higher returns. Lemon Tree signed 14 new management and franchise contracts in Q1FY26, which added more than 1,200 rooms, and operationalized five hotels with 392 rooms. The portfolio now consists of 226 hotels and 18,430 rooms, of which almost half is still open. Debt in the first quarter was £ 1,658 crore, which management expects to gradually facilitate. A potential scholarship of Fleur hotels By December 2026 could accelerate the shift to an asset light structure. Short -term pain is still, renovations will keep costs high and limit margins, while new signs will take time to contribute earnings. Motilal Oswal Financial Services expects the growth momentum seen in Q1FY26 to continue, led by the ramp of Aurika Mumbai, dynamics for better demand supply, renovation-driven profits in ARR and occupancy, and the Infinity 2.0 loyalty program. Lemon Tree’s shares are traded at an enterprise value of 18.5 times estimated FY27 EBITDA, according to Bloomberg estimates, leaving little room for almost-term upside down, unless the makeup delivers more than it promised. Catch all the business news, market news, news reports and latest news updates on Live Mint. Download the Mint News app to get daily market updates. More Topics #Markets Premium #Memon Tree Hotels Read Next Story