Stock To Buy: Brokerage Suggests 'Buy' This Tour Travel Services Stock For 20% Potential Upside

Edelweiss Wealth Research in its report on Easy Trip Planners (EaseMyTrip) has given a buy rating for a target price of Rs 452 apiece. Investors buying the stocks at the Current market price could expect potential gains of 20%. The management of the company believes that the best time for travel and tourism in India is ahead as the pent-up demand is extremely strong. Despite the rise in fares, flights and hotels are running in full capacity. With the emergence of new airports and new airlines, OTAs are being preferred more compared to the direct captive ones or offline travel agents. Furthermore, the management believes that COVID has positively impacted OTAs, with the pandemic forcing people to book online rather than approach travel agents offline. Easy Trip Planners, being the second largest OTA in India, is expected to benefit from these structural changes in the sector.

Stock Outlook & Performance

On July 15, the stocks of the Easy Trip Planners closed at Rs 376.75 apiece after falling 0.89%. The previous close was Rs 380.10 apiece.

The stock hit the 52-week low level at Rs 261 apiece on 08 March 2022. The 52-week high level of the stock touched Rs 717.65 apiece on recorded on 17 September 2021.

Investors buying the stock at the CMP could expect a 20% potential upside considering the estimated target price of Rs 452 apiece.

This week, the stock slid down 3.62%, and in the last 1 month, the stock slid 0.09. In the last 3 months, its shares slid down 7.46%. In the past 1 year, it has given positive returns of 70.78%.

Easy Trip Planners' gross booking revenue is dependent on domestic air traffic

Easy Trip Planners generates gross booking revenue (GBR) largely from domestic air travel. As per the management, before the outbreak of COVID-19, domestic air bookings accounted for ~80% of bookings in the consolidated air segment; the proportion increased during the pandemic due to air travel restrictions. Easy Trip Planners has a strong presence in the air travel industry's B2C segment (~95% Easy Trip Planners revenue), specifically in the need-based travel category, supported by its No Convenience fee strategy.

"We expect Easy Trip Planners to continuously grow GBR, with increase in market share in segments where it operates and continue to be only profitable company among domestic OTAs," the brokerage said.

Domestic air traffic recovered to pre-pandemic levels

According to the brokerage, "The domestic air traffic reached the pre-pandemic level in May 2022. Before the pandemic (in 2019), average monthly domestic air traffic was 1.2cr; in May 2022, total domestic air traffic reached 1.2cr. This indicates that air traffic is improving rapidly, and the current COVID wave has hardly had any impact on air travel. We believe, this would boost GBR of OTAs, including Easy Trip Planners."

Easy Trip Planners ties up with international airlines to generate volume

Easy Trip Planners expanded international presence by incorporating subsidiaries in the UAE, Singapore, the UK, the Philippines, Thailand, New Zealand and the US, and launched localised travel search engines in each global subsidiary, generating GBR from local carriers, agents, etc. Before COVID, Easy Trip Planners recorded more than 100% growth in international air travel gross bookings and contributed ~20% to the air segment. International traffic carried by domestic carriers reached 80% of the pre-pandemic level in April 2022. With improvement in international air travel, Easy Trip Planners's GBR is expected to increase further.

Net revenue (as %GBR) to be at current level

Commission from airlines to OTAs increased during the pandemic, with airlines focusing on passenger load factors. However, with normalisation in air traffic and increase in air fares, airlines have been reducing the commission (as %GBR). In Q4FY22, all OTAs reported sequential decrease in the net revenue rate as %GBR.

The brokerage said, "We believe that Easy Trip Planners's strong support in past two years to domestic airlines has helped it to form strong relations which are difficult to replace in the near term."

Easy Trip Planners's net revenue (as %GBR) increased from 6.8% in FY19 to 10.9% in FY22, compared to peers MMT (from 7.3% to 8%) and Yatra (from 5.8% to 6%) during the same period. However, in Q4FY22, the net revenue (as %GBR) reduced to 8.4%/7.1%/7.1% for Easy Trip Planners /MMT/Yatra.

Easy Trip Planners management expects the net revenue (as %GBR) to increase to 9-10% in the short term, driven by its high share in the domestic B2C market and increase in its international air travel contributions.

Outlook & valuation

According to the brokerage, "The significant pick up in domestic as well as international air travel is expected to benefit Easy Trip Planners. As a result, the company is expected to record strong volume/transactions along with gross booking revenue in the current quarter (Q1FY23). Also, Easy Trip Planners plans to focus on expanding its non-air verticals in FY23 onwards. The company strategically registered inorganic growth by acquiring innovative companies across diverse travel segments and evolving into a complete travel ecosystem. Easy Trip Planners recorded 57% growth in air bookings segment in FY22 and expects to continue to register strong growth in the coming years with consistent profitability. We maintain a 'BUY' rating with a Target Price of Rs 452."

About - Easy Trip Planners Ltd (EaseMyTrip)

Easy Trip Planners Limited (EaseMyTrip) operates as a travel company. The Company offers ticket booking, transport arrangements, tour planning, and accommodation services. Easy Trip Planners serves customers in India. EaseMyTrip commenced its operations in 2008 by focusing on the B2B2C (business to business to customer) distribution channel and providing travel agents access to its website to book domestic travel airline tickets to cater to offline travel market in India. Subsequently, by leveraging its B2B2C channel, the company commenced operations in the B2C (business to customer) distribution channel in 2011 by primarily focusing on the growing Indian middle-class population's travel requirements.

Disclaimer

The stock has been picked from the brokerage report of Edelweiss Wealth Research. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.