On the back of multiple triggers, the bookings on Indian online travel agents (OTA) are in for a sharp recovery at 46 per cent CAGR (Compound Annual Growth Rate) over FY22-25E to Rs 1.5 trillion, within this 80/ 37 per cent YoY in FY23/ FY24E, Axis Securities said in its report on Indian Travel Tech.
The growth seen in OTA bookings by the domestic brokerage house is mainly on the basis of pent-up travel demand; rising online penetration; recovery in international flight and budget hotels and OTAs adding new products and services.
Like their global OTA peers, Indian OTAs can generate healthy returns given moderate competitive intensity, cost optimization, and improving scale, the brokerage said.
The brokerage initiate coverage on Make My Trip (MMYT) with Buy rating on dominant position and improving returns with around 10 per cent RoE by FY25E). And, initiate Ease My Trip (EMT) with Reduce rating due to valuation concerns though we like its lean cost structure and elevated returns.
Amid recovery in travel post Covid, Make My Trip (MMYT) has been a major winner in the OTA space maintaining its market leadership position, Axis Capital said.
The company’s net revenue to grow at 49 per cent CAGR over FY22-FY25E given better position to drive innovations led by large technology team; impressive customer engagement metrices and continuous addition of new revenue streams, the brokerage said in its report about MMYT.
While Ease My Trip has a resilient lean business model that can adapt to changing environment. This has helped it stay profitable during Covid pandemic and gain market share.
We like EMT’s low-cost business model, strong growth potential both organic and inorganic, healthy financial position with elevated returns and improving brand visibility post IPO, the brokerage said, adding that it remains wary of its elevated valuation as the stock is up ~31%/ 72% in 6/ 12 months.