On Friday, Lemon Tree Hotels (LEMONTRE:IN) received an upgrade in its stock rating by Elara Securities India from Accumulate to Buy, while maintaining a price target of INR160.00.
The upgrade comes despite the company's ongoing renovations of the Keys portfolio, which are expected to limit the full-scale benefits from improved occupancy and higher Average Room Rates (ARR). These benefits are anticipated to be more accurately reflected in the second half of the financial year 2026.
The analyst from Elara Securities India noted that the potential listing of Lemon Tree's subsidiary, Fleur Hotels, is likely to coincide with the period when the full benefits of the company's efforts will be realized. This strategic move is projected to contribute to a significant rerating of the company's stock during the latter half of FY26.
While the renovation of the Keys portfolio may result in higher expenses in the short term, the analyst believes that the steep correction in Lemon Tree's stock price today justifies the upgrade to a Buy rating. The firm's price target is based on 19 times the FY26 estimated enterprise value to EBITDA (EV/EBITDA) ratio.
Elara Securities India maintains its earnings estimates for Lemon Tree Hotels for FY25 and FY26. The firm's assessment indicates that the company's growth prospects and strategic initiatives are expected to provide a strong foundation for a rerating in the future, despite the immediate costs associated with the ongoing renovations.
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