Yatra Online shares on way for 28% upside amid industry tailwinds, margin improvement, says Antique Stock Broking

Domestic brokerage, Antique Stock Broking in its report on Online Travel Agents (OTAs) companies has initiated coverage on Yatra Online (Yatra) with a BUY rating; in contrast, the brokerage has not assigned a rating to MakeMyTrip or Easy Trip Planners. 

However, the brokerage house predicts that all three companies will profit from the growing tailwinds in the travel sector and will see an increase in their margins in the near future. 

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The brokerage claims that one of the main drivers of India's economy is the travel and tourism sector. India's travel sector is predicted to expand by roughly 9–12%, reaching roughly ₹4,540–4,560 billion by FY28, after growing at a 6-8% CAGR from FY17–23.

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“We believe demand will be supported by rising disposable income, urbanisation, and a rapidly growing online consumer base. Online penetration in the travel industry has witnessed a rapid rise in India. It is expected to grow at a CAGR of about 11.5-12.5%, reaching ₹3,335-3,355 billion by FY28, primarily due to the increasing penetration of the internet and smart phones. OTAs have evolved globally into digital marketplaces that connect both B2B and B2C customers directly with a range of travel-related products including flights, hotels, and travel tours,” the brokerage said in its report. 

Here's what the brokerage says about Yatra Online

Yatra is the third-largest online travel company in India among major OTA players and the country's largest corporate travel service provider, according to the brokerage. When it comes to corporate travel and hotel reservations, the company has a high retention rate of roughly 98%, which translates into a higher yield (roughly 1.5x) than in the consumer segment.

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The brokerage feels that Yatra will gain from the continuing recovery in corporate travel, which has so far trailed the recovery in consumer travel in the aftermath of the COVID-19 pandemic. The company's gross bookings percentage for B2B and B2C transactions is currently 40%:60%. By FY25E, it anticipates a gradual increase to 45%:55%, which will result in improved profitability.

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"We believe the ongoing tailwinds in the Indian travel industry will enable the company to deliver revenue/ Earnings before interest, taxes, depreciation, and amortisation (EBITDA)/ profit after taxes (PAT) Compounded Annual Growth Rate (CAGR) of 23%/ 67%/ 157% over FY23-26E. Considering a steady and loyal customer base, established distribution network and leadership position in India's corporate travel, we assign a multiple of 24x to 1HFY26 earnings per share (EPS). We initiate coverage on Yatra with a BUY rating and a target price of ₹168," the brokerage said.

According to the report, the brokerage believes there is a potential upside of 28% for Yatra Online stock from the CMP of ₹131.

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Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.