Lemon Tree Hotel (LEMONTREE)

FairStock Score: 56/100 — STEADY

Score breakdown: P/E: 0/3 · ROCE: 1/2 · Growth: 2/2 · Dividend: 0/1

Key Financials

Strengths

• Sales growth of 23.60% and profit growth of 60.97% show strong recent momentum
• ROE of 18.93% and ROCE of 12.98% indicate acceptable capital returns
• Piotroski F-Score of 8/9 points to solid earnings quality and improving financials
• Free cash flow of ₹414 Cr provides internal funding cushion
• Latest quarter sales of ₹406 Cr and net profit of ₹82 Cr reinforce operational traction

Concerns

• At P/E 37.51, P/B 8.27 and Graham Number of ₹30.31, valuation offers no margin of safety (-275%)
• EV/EBITDA of 263.96 is extremely expensive and unsustainable for a hotel operator
• Debt/Equity of 1.85 and Altman Z of 2.50 reflect balance sheet risk in a downturn
• Zero dividend and low promoter holding of 22.28% reduce shareholder-friendly ownership

AI Analysis

Let me look at Lemon Tree with Graham's rules in mind. Sales are up 23.60%, profit up 60.97%, ROE is 18.93%, and the Piotroski score is 8 out of 9. The latest quarter shows sales of ₹406 Cr and net profit of ₹82 Cr. Those are good numbers, but I am not in the business of paying for yesterday's growth. The price is ₹121.50; I am being asked to pay 37.51 times earnings and 8.27 times book value. Book value is only ₹14.69. Graham would never buy a cyclical hotel at this price without a margin of safety. The Graham Number is ₹30.31, which means my margin of safety is minus 275%. Even the estimated DCF value of ₹279.84 is above the price, but EV/EBITDA of 263.96 makes me nervous: the market is capitalizing operating profits far too generously. The balance sheet is not clean: debt/equity is 1.85 and Altman Z is 2.50, in the grey zone. There is no dividend, and promoter holding of 22.28% is too low for my comfort—I like owners who eat their own cooking. I should also remember that hotels are cyclical. A downturn will compress earnings and make that debt heavier. The PEG of 2.28 tells me growth is already priced in. Free cash flow of ₹414 Cr is encouraging, and a Piotroski score of 8/9 suggests the company is becoming more efficient. But value investing demands paying a fair price for a good business, not a rich price for a good quarter. I will watch, but not buy at this price.

Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer