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Revenue trajectory continues to improve…

Accelya's revenues increased 4.4% QoQ to | 74.1 crore. However, EBITDA margins declined from 31.7% to 27.1% in Q3FY21 (financial year is June ending) mainly led by higher other expenses. However, PAT was flat QoQ at | 10.9 crore, mainly led by lower tax expenses.

Recovery in travel demand to drive growth

Accelya partners with airlines right from the time a ticket or an airway bill is issued, all the way through its entire life cycle until the data is converted into actionable decision support. Since majority of its revenues is from the airline vertical, revenues were severely impacted by the ongoing crisis and travel restrictions.

However, the company is witnessing improving revenue growth on a QoQ basis from Q2FY21 onwards. In the current quarter also, Accelya witnessed an improvement in revenues mainly led by a recovery in worldwide passenger volumes. Going forward, we expect travel demand to improve led by vaccination drive across countries, improved volumes in airline segment and easing of lockdowns across countries. Hence, post a dip of 29% YoY in FY21E, we expect revenues to increase at ~25% CAGR in FY21E-23E.

Improvement in revenues, operational efficiencies to drive margins

The slowdown in revenues has impacted margins in the near term. Hence, we expect EBITDA margins to dip ~800 bps YoY in FY21E to 29%. However, we believe a pick-up in revenues coupled with operating efficiencies will help the company in improving its margin trajectory in longer run. Hence, we expect the company to register an improvement of 700 bps YoY in EBITDA margin to 36% in FY22E and another 100 bps YoY in FY23E to 37%.

Valuation & Outlook

Accelya has witnessed an improvement in revenues in the current quarter mainly led by recovery in worldwide passenger volumes. The improvement in revenues of 4.4% QoQ was on the back of 19.6% QoQ growth in the previous quarter. Q4 being a seasonally strong quarter for travel demand, we expect Q4 revenues to further improve.

Going forward, we expect improving trend in revenues to continue in coming quarters led by recovery of economy, vaccination drives and improved volumes in airline segment. Hence, we maintain our BUY rating on the stock with a revised target price of | 1,070 (17x FY23E EPS) (earlier target price | 1,100).

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