Which is the best travel stock, Ixigo or EaseMyTrip?

India's travel industry is expected to grow at a compound annual growth rate of 9% over the next five years. Photo: AFP
India's travel industry is expected to grow at a compound annual growth rate of 9% over the next five years. Photo: AFP

Summary

  • Both companies are poised to capitalise on the growing demand for tourism. But which one is a better investment?

The travel and tourism industry is rocketing, with wanderlust hitting new heights around the world and especially in India.

The travel industry in India is expected to grow at a compound annual growth rate (CAGR) of 9% over the next five years, driven by surging interest in travel, government initiatives to boost infrastructure and transportation, and rising disposable incomes.

The boom has intensified competition among travel companies, which are all vying to be your one-stop travel partner by offering custom-built adventures, cutting-edge tech tools, and deals.

In this article we compare two leading travel companies, Ixigo and Easy Trip Planners, on various parameters to see which one’s better.

Business overview

# Ixigo

Founded in 2006, Le Travenues Technology is an online travel agency that allows users to book train, flight and bus tickets through its platform Ixigo. It also allows users to book hotels and holiday packages.

Recently, Ixigo developed an AI-based platform that will help travellers plan detailed itineraries. It also launched a value-added service called Ixigo Assured Flex through which travellers can book their air and rail tickets flexibly.

# EaseMyTrip

Easy Trip Planners Ltd is India's second-largest online travel platform, offering travel-related products and services through its brand EaseMyTrip.

The company sells airline, train and bus tickets; hotel bookings; holiday packages and other value-added services. It also offers hospitality services through Spree Hospitality, which has a portfolio of properties across 45 locations.

EaseMyTrip recently ventured into charter solutions through its subsidiary Nutana Aviation Capital. It also has a presence in the insurance sector through its subsidiary, EaseMyTrip Insurance Broker Pvt Ltd.

Source: Equitymaster
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Source: Equitymaster

EaseMyTrip is the larger company, with a market cap of 75.9 billion compared to Ixigo’s 65.3 billion. In terms of reach, EaseMyTrip has the largest agent network in India, with more than 60,000 agents across B2E (business-to-employee), B2C (business-to-consumer), and B2B2C (business-to-business-to-consumer).

It also has offices in several foreign countries including Singapore, the UK, the UAE, Thailand, New Zealand, and the US. It has served more than 20 million customers to date.

Ixigo, on the other hand, has the highest number of monthly active users (around 83 million), and is also one of the fastest-growing online travel agencies in terms of app downloads and users.

It’s hard to compare the performance of the two companies on the bourses, given that Ixigo shares were only listed on 18 June. Within two days of listing, the shares of the company zoomed more than 112%, more than doubling investors’ money in no time. EaseMyTrip shares, on the other hand, have fallen by 1.3% over the past year, during which time the Nifty 50 has increased 24.6%.

# Revenue

Travel companies mainly earn revenue from commissions. By analysing revenue patterns, we can determine whether the company has been able to do more business than it did in previous years.

In terms of revenue growth, Ixigo has outpaced EaseMyTrip. In the past five years, the company’s revenue grew at a CAGR of 65.5%, while EaseMyTrip’s revenue grew at a CAGR of 34.7%. This is mainly because the company has a diversified business model and has also leveraged AI.

EaseMyTrip has seen consistent revenue growth despite the pandemic-led lockdowns owing to its strategic acquisitions and partnerships with hotels, airlines, technology providers, and various travel service providers in other countries. These partnerships and acquisitions have helped the company diversify its revenue across multiple streams, such as ticket bookings, hotel bookings, holiday packages and insurance.

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Source: Equitymaster

# Profitability

EaseMyTrip leads Ixigo on profitability. In the past five years, earnings before interest tax depreciation and amortisation (Ebitda) has grown at a CAGR of 258.3%, driven by growth in revenue and a focus on reducing discounts. Net profit grew at a CAGR of 35.6% during the same period. The company also has higher gross and net profit margins than Ixigo.

For Ixigo, Ebitda and net profit have turned positive in the past five years, indicating strong growth in profits on the back of strong revenue growth and cost-efficient services. Profit margins, however, are tiny when compared to those of its competitors. Given the company’s growth trajectory, however, margins are expected to improve.

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Source: Equitymaster

# Debt management

EaseMyTrip and Ixigo are both debt-free companies.

EaseMyTrip has acquired several travel and hospitality businesses in the past five years and plans to continue doing so. At present it has no significant capex planned, but has enough cash flows for any big investment that comes its way.

Ixigo, on the other hand, repaid all its debt in FY22 and has planned significant capex using its IPO funds. It plans to invest in cloud infrastructure and technology to offer better services to its customers and also plans to grow through acquisitions.

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Source: Equitymaster

# Return ratios

In terms of return ratios, EaseMyTrip leads the way. In the past five years, its return on capital employed (RoCE) and return on equity (RoE) averaged 59.5% and 38.9%, respectively. These are lower than they were before covid, but still are higher than those of Ixigo, which had negative return ratios until March 2023. These ratios are expected to improve with the company’s profit margins.

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Source: Equitymaster

# Dividends

Ixigo doesn’t pay dividends to its shareholders. EaseMytrip does so, but not regularly. In the past five years, the company has paid dividends only twice. Its average dividend payout and dividend yield in the past three years is 9.4% and 0.2%, respectively.

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Source: Equitymaster

# Valuations

The price-to-earnings and price-to-book multiples of EaseMyTrip are 73.5x and 12.6x, respectively. For Ixigo, the PE multiple is 215x, while the PB multiple is not available as the shares were only listed last week.

Shares of Ixigo are overvalued when compared to those of EaseMyTrip. If we compare it with the five-year average and industry, EaseMyTrip’s stock is overvalued.

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Source: Equitymaster

So which is the better travel stock?

In terms of profit growth, profit margins and financial efficiency, Easy Trip Planners has outpaced Ixigo. The company has grown primarily through acquisitions in the last few years, during which time it has ventured into hotels, holiday packages, train tickets, bus tickets, and insurance.

It was the first company of its kind to charge a convenience fee, which helped reduce its discount costs. It has no significant capex plans but is always looking to grow the business through acquisitions.

Ixigo, on the other hand, has been in the travel industry for over 18 years. It is one of the leading online travel agent apps with high average monthly users and downloads. It is also the largest train ticket distributor, with a largest market share of 51%, and second-largest bus-ticketing OTA with a market share of 12.5%.

It offers PNR confirmation and predictions, train seat availability alerts, personalised recommendations, instant fare alerts, and automated customer support using AI. It recently ventured into insurance to expand its services.

Ixigo plans to invest its IPO proceeds in cloud infrastructure and technology to offer better services to its customers, and in acquiring companies.

Both the companies are well established and have good growth plans that could help them capitalise on the growing demand for tourism.

Disclaimer:This article is for information purposes only. It is not a stock recommendation and should not be treated as such.

This article is syndicated from Equitymaster.com

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