Are Lemon Tree Hotels Ltd latest results good or bad?

Lemon Tree Hotels Ltd reported its Q3 FY26 results, showcasing a robust operational performance characterized by significant revenue and profit growth. The company achieved net sales of ₹406.05 crores, reflecting a sequential growth of 32.57% and a year-on-year increase of 14.32%. This quarter marked the highest revenue in the company's history, driven by peak season demand, which positively impacted occupancy rates and average room rates. The net profit for the quarter stood at ₹62.67 crores, representing a substantial sequential increase of 81.13%. The profit after tax (PAT) margin improved to 20.15%, up from 13.69% in the previous quarter, indicating enhanced profitability driven by operational leverage and a lower effective tax rate. Operating profit also saw a notable increase, with an operating margin of 50.41%, which is the highest in recent quarters, reflecting a strong cost structure that benefits from increased revenue. Employee costs were well-managed, contributing to the margin expansion. However, despite the strong operational metrics, the company continues to face challenges related to high leverage, with a debt-to-equity ratio of 1.56 and a debt-to-EBITDA ratio of 11.24x. This elevated debt level raises concerns about financial flexibility, particularly in softer demand periods. Overall, while Lemon Tree Hotels demonstrated exceptional operational strength in its latest results, the company saw an adjustment in its evaluation, reflecting the ongoing concerns regarding its high valuation relative to peers and the implications of its debt levels. The upcoming quarters will be crucial for assessing the sustainability of this performance as the company navigates through the cyclical nature of the hospitality sector.