Shares of Lemon Tree Hotels ended 3.5 percent higher on Tuesday and outperformed a weak market.

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The shares gained after broking firm CLSA maintained its buy rating on the stock with a price target of Rs 102. The price target implies a potential upside of over 30 percent.

Shares of the hotel chain have surged more than 40 percent in the past one year and doubled over a three-year period.

CLSA expects Lemon Tree Hotels’ demand to grow at a compound annual growth rate (CAGR) of 12 percent, and pegs the company to increase the number of its rooms to nearly 25,000 in the next five-year period.

The brokerage believes the low upcoming supply to drive Lemon Tree Hotels’ Average Room Rate (ARR) growth to a 10-15 percent CAGR and expects the company's earnings before interest, taxes, depreciation, and amortisation (EBITDA) margin to remain over 50 percent.

The brokerage firm has stated that Lemon Tree aims to become a debt-free company within a period of four years.

In an interaction with CNBC TV-18 last week, Patanjali Keswani, the Chairman and Managing Director of Lemon Tree Hotels, said that he expects hotel prices to keep rising for the next four years, given the current state of the hotel industry.

He explained that the demand for hotel rooms is growing at a rate of 10 percent each year, while the supply is only growing at a rate of 5 percent.

Earlier this month, Lemon Tree Hotels announced adding two new properties at the popular beach destination Dapoli in Maharashtra under its brands ‘Lemon Tree Hotel’ and ‘Keys Lite by Lemon Tree Hotel’.

Shares of Lemon Tree Hotels ended 3.4 percent higher at Rs 77.95.

(Edited by : Hormaz Fatakia)