Lemon Tree Hotels (LTH) Q3FY21 result was a mixed bag. Net sales were below our estimate, while EBITDA margin was an impressive beat. Healthy traction from retail segment aided by leisure and staycation continued in Q3FY21 as well, while business segment recovery was at a slower pace than anticipated. Net sales declined by 65.7% YoY to Rs 684 million, while EBITDA came in at Rs 201 million, down by 75.3% YoY. The company reported net loss of Rs 457 million compared to net profit of Rs 122 million in Q3FY20.

Commenting on the result review, the broking firm IDBI Capital said, "Our interaction with the management suggests that gradual recovery in corporate segment is expected in near term and occupancies should get back to pre-Covid level in H2CY21E. LTH’s key markets viz Mumbai, Delhi and Hyderabad are seeing demand traction and opening up of economic activities bodes well for further strengthening of RevPAR.

We have marginally increased our net sales/EBITDA for FY22E/FY23E. After a sharp run up in the stock price, value looks priced in at current level. We downgrade the stock to Sell with a revised TP of Rs 34 (from Rs 29), based on 17x EV/EBITDA (unchanged) on FY23E."

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