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EASEMYTRIP is all set to sail post-covid sectoral tailwinds
EASEMYTRIP’s asset light business model, strong fundamentals, debt free balance sheet, cost-efficient operations and recent M&A point towards steep revenue and EBITDA growth.
EASEMYTRIP was founded in 2008 and is the 2nd largest domestic online travel agency, operating under the flagship brand ‘Ease My Trip’. EASEMYTRIP provides end-to-end travel solutions, including airline tickets, hotels, holiday packages, rail tickets, bus tickets, and taxis, in addition to ancillary value-added services such as travel insurance, visa processing, and tickets for miscellaneous activities.
Sector ready to bounce back in the post-covid era
The Indian online travel market is expected to reach $31bn by FY 2025, growing at a 14% CAGR from FY 2020 levels. The hotel & tourism sector received a cumulative FDI inflow of $15.89bn between 2000 beginning and June 2021. Various government initiatives like memorandums of understanding with travel partners, development of travel attractions, FDI push, and rising use of IoT are all expected to boost sectoral growth.
Competitively placed vis-à-vis peers with ample growth runway
EASEMYTIP is a leading player in the domestic air ticketing market with a ‘No convenience fee’ and ‘No hidden cost’ strategy, resulting in customer stickiness and a repeat transaction rate of 86% in its B2C channel. Focus is on lean and cost-efficient operations, supported and powered by robust technology-enabled infrastructure - benefits of which appear to be fully reflected in recent margin expansion. EASEMYTRIP is a key player in India’s OTA industry along with Clear Trip, MakeMyTrip, and Yatra as key competitors. While it has the largest agent network in the Indian OTA industry, it ranks 2nd in terms of air ticket volume and 3rd in terms of gross booking revenue and the number of registered customers. The company has been maintaining its market share of 12-13%, while Make My Trip is meaningfully ahead at 38% with Yatra at 11%. Also, the company’s registered customer base clocked 21% CAGR, increasing to 1.32cr customers in 9MFY21 from 58.7 lakh customers in FY18. This compares to 4.6cr and 1.1 cr at Make My Trip and Yatra respectively. Notwithstanding a promising growth runway, EASEMYTRIP appears to be looking intently at inorganic growth measures over the next three to five years underpinned by a desire to expand from a travel booking platform to a wider ecosystem play. This is fairly well evidenced by the prior acquisitions of Spree, Traviate, and YoloBus.
Solid EBITDA growth, margin expansion, and cash flow generation at play
Gross booking revenue (GBR) for H1FY22 was INR1,251cr. An increase in operational efficiency, efficient cost management systems in place, and synergy from acquisitions drove a sparkling 92.58% CAGR EBITDA growth during FY2018-2021. The most flashy insight behind the stellar EBITDA growth has been a sharp rise in EBITDA margins from low double digits in 2018 to nearly 50% in 2021. ROE/ROCE grew at 54.9% and 60.4% CAGR during FY2018-2021. Debt to equity is fairly accommodative at 0.1x. and interest coverage ratio stands at 27.7x. The company has also witnessed a 150% Q-o-Q growth and 164% Y-o-Y growth from Q1FY21 to Q2FY22 albeit helped by a depressed base. With domestic travel returning to normalcy and airlines allowed to operate at their full capacity, we expect meaningful traction in its revenues and profitability growth. It is also worthwhile to note that EASEMYTRIP has been the only profitable online travel agency during FY 2018-2020. An industry-wide robust network, strong cash flow generation with limited capex requirement for growth, disciplined cost management approach, and a debt-free balance sheet status helps keep the return ratios healthy and intact.
Valuation on relative terms looks accommodative
EASEMYTRIP currently trades at 50.35x TTM P/E vs sector PE of 261.02x. On an EV/EBITDA basis, EASEMYTRIP stands at 40x+ with MAKEMYTRIP significantly ahead in light of choppy recent performances and mixed outlook. With a lack of earnings at close comps, it is perhaps worthwhile to look at EV/Sales. EV/Net Sales stood at 19.20x for FY 2022. Close comps IRCTC (NSE: IRCTC) trades at 107.97x P/E and 34.02x EV/Net Sales, Growing Ventures (BSE: GROWINGTON) trades at 83.92x P/E and 7.97 EV/Net Sales, and Thomas Cook (NSE: THOMASCOOK) trades at 6.88x EV/Net sales, respectively on FY 2022.
Recent acquisitions of Spree, Traviate, and YoloBus are expected to bring more synergies, stronger tech prowess, and data expertise with the potential to unlock new revenue streams while further solidifying the margin expansion play. With EASEMYTRIP’s asset-light business model and strong fundamentals, it remains the best proxy vs. airline or hotel companies to play on travel recovery. We are LONG.
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Disclaimer: The views expressed here are the views of Arkvega Partners LLP, and are subject to change at any time based on market and other conditions. This is neither an offer nor solicitation for the purchase or sale of any security, and should not be construed as such. References to specific securities and issuers are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. We strongly advise you to do your own research and consult an accredited investment advisor before investing based on what you read here. Arkvega Partners LLP or its employees may have exposure in the financial instrument discussed above and can close positions in the future without prior intimation.