The brokerage said improving occupancy rates and strong hotel portfolio will drive growth of the hotel chain going ahead.
"Indias hotel industry has seen a prolonged period of demand-supply mismatch.
Supply growth has, however, slowed since FY15 and this is likely to continue until
FY21. LT is well placed to leverage its existing market position as a leading midpriced hotel chain," said CLSA in a note.
CLSA said Lemon Tree's wide geographical spread, presence across the mid-priced sector and development pipeline allow it to benefit from the expected growth in the industry led by domestic travel and higher discretionary spending trends.
"We expect an Ebitda Cagr (compounded annual growth rate) of 60% over FY18-20, with ROCE (return on capital employed) expanding 684bp (basis points) over the same period," said CLSA. The firm said that an incremental shift to asset-light mode could drive further re-rating in the stock.