ICICI Securities has reiterated a Buy call on Lemon Tree Hotels Ltd., with a revised target price of Rs 142, implying 29% upside from the CMP of Rs 110 over a 12-month horizon. The brokerage sees the company entering a more compelling phase of growth, supported by steady room-rate momentum, improving occupancies, and a strategic restructuring that could unlock shareholder value. In Q4FY26, revenue rose 10% year on year to Rs 416.4 crore, while adjusted PAT increased 9% to Rs 117.9 crore, underscoring resilience despite geopolitical turbulence and temporary margin pressure.

What Drove The Quarter

Revenue growth remained robust despite a difficult operating backdrop. Q4FY26 was shaped by a mixed demand environment, with weakness in corporate and crew travel offset by resilient direct-to-consumer and online travel agency demand, helping consolidated RevPAR rise 7% and occupancies improve to 78.5%. ADR increased 6% year on year to Rs 7,457, reflecting the company’s ability to preserve pricing even in a volatile quarter.

Margins were softer, but the core operating engine stayed intact. EBITDA margin slipped by 223 basis points to 51.7% because of renovation spending, technology upgrades and GST-related impact, yet EBITDA still climbed 5.5% to Rs 215.2 crore. That shows a business that is investing through the cycle rather than sacrificing long-term competitiveness for near-term optics.

Demand And Portfolio Mix

The company’s brand portfolio continues to show differentiated performance. Lemon Tree Hotels remained the strongest performer in Q4FY26, with room revenue growth of 23% and occupancy near 80%, while Lemon Tree Premier and Keys also delivered healthy gains in RevPAR and occupancy. Aurika, though softer in the quarter, retained its premium appeal and delivered 19% RevPAR growth for FY26, supported by a much stronger occupancy trajectory over the year.

Management expects demand to normalise further as geopolitical stress eases and seasonal drivers improve. The brokerage notes that Q1FY27 should benefit from a softer base, while H1FY27 may get support from renovated inventory and the opening of 2 of 3 blocks at Aurika, Shimla. A healthier MICE pipeline, wedding demand, and stronger domestic retail travel could then add momentum in the second half.

Restructuring Could Re-rate The Story

The most important strategic catalyst is the planned restructuring. Lemon Tree is working toward a demerger that would split the business into two entities: an asset-light Lemon Tree platform with high EBITDA margins and a debt-free, high-RoCE profile, and Fleur, which will house the ownership-led portfolio. The process is expected to conclude over the next 15 to 18 months, subject to NCLT approval.

That separation could be value accretive for public shareholders. ICICI Securities believes the effective shareholding in Fleur will rise to 57.5% from 45.8% after restructuring, while Warburg Pincus’ Rs 960 crore capital infusion gives Fleur room to pursue acquisitions and scale-up opportunities. In plain terms, the market may begin to value the cleaner, asset-light earnings stream more generously once the structure is simplified.

Growth Targets And Financial Trajectory

ICICI Securities expects revenues to grow at a CAGR of 12.3% over FY26-FY28E, led by premium additions, healthier RevPAR growth, and a broader management-fee engine. It estimates FY27 revenue at Rs 1,610.3 crore and FY28 revenue at Rs 1,820.2 crore, while adjusted PAT is projected to rise from Rs 314.2 crore in FY26 to Rs 473.5 crore in FY28E. EBITDA margins are also expected to recover toward 50% as renovation and GST pressures ease.

The numbers suggest that earnings quality should improve, not just headline growth. EBITDA is projected at Rs 903.6 crore by FY28E, with RoE expected to rise to 25% and RoCE to 17.4%. Debt metrics are also trending better, with debt-to-EBITDA seen falling to 1.5x by FY28E from 3.0x in FY26.

Stock Levels And Target

Here are the key investor levels from the report. CMP is Rs 110, the target price is Rs 142, and the implied upside is 29% over 12 months. The report also highlights a 52-week range of Rs 100 to Rs 181, which provides a useful reference band for risk and reward.

For investors, the central thesis is that Lemon Tree is no longer just a hotel operator; it is evolving into a more scalable platform with better margin visibility and a potentially more focused capital structure. The restructuring, premium room additions, and management-fee growth together create a more durable earnings story.

Risks To Watch

The principal risks remain familiar but material. A global slowdown or a black swan event could weaken room demand, while any delay in debt reduction could keep leverage elevated for longer than expected. Investors should also track execution on renovation, the pace of openings, and whether corporate travel fully recovers as the macro environment stabilises.

On balance, the report argues that Lemon Tree is moving from a period of operational noise toward a cleaner and more valuable earnings structure. If demand holds and restructuring advances on schedule, the stock may deserve a higher multiple than it currently commands.