Lemon Tree Hotels Ltd Research ReportQ3FY21

The performance of Lemon Tree (LTH) improved gradually in Q3FY21 vs. Q2. However, the same remained below our estimates. Revenues improved 43.6% QoQ to | 68.4 crore. Higher demand for staycations, work from hotels led to rise in occupancy to 42.4% vs. 32.4% in Q2FY21. However, with a change in demand mix, average room rates were down 4.7% QoQ, 45.6% YoY to | 2,538/room. Operational inventory increased from 86.8% in Q2 to 91.2% in Q3FY21. Total expenses were at | 48.3 crore, down 59.2% YoY, up 22.9% QoQ. Sharp reduction in employee costs (down 62.5% YoY to | 15.8 crore) and other cost (down 59.6% YoY to | 27.1 crore) kept cost lower during the quarter leading to positive EBITDA for the quarter. However, with higher interest (| 45.5 crore) and depreciation (| 27.3 crore), the company reported net loss of | 46.7 crore (vs. I-direct estimated net loss of | 39.5 crore). Demand from retail & MSMEs from large corporates is witnessing gradual recovery. While we anticipate a gradual revival in corporate travel, leisure demand is already strong and this traction is expected to further increase in months ahead.