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Operating performance improves…

Accelya reported Q2FY21 results (June ending). Revenues registered healthy improvement of 19.6% QoQ to | 71.1 crore mainly led by recovery in airline industry. EBITDA margins improved from 18.4% in Q1FY21 to 31.7% in Q2FY21. PAT increased from | 2 crore in Q1FY21 to | 10.9 crore in Q2FY21 mainly due to expansion in operating margins. The company has declared a special interim dividend of | 35/share. The company’s CFO Gurudas Shenoy will be moving to a new role within the Accelya group (Farelogix Inc., (US)) and has stepped down as the CFO of the company. Uttamkumar Bhati, who is currently the Vice President – Finance reporting to Mr Shenoy, has been appointed as the CFO of the Company. Mr Bhati has been with the company for 16 years.

Recovery in travel to drive revenues

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, Accelya is witnessing improved revenues (up 19.6% QoQ in Q2FY21) mainly led by easing of lockdowns across countries and improved volumes in airline industry. Going forward, we expect Accelya to register improving revenues in coming quarters led by recovery of economy, vaccination and improved volumes in airline segment. Hence, post a dip of 22% YoY in FY21E (due to sharp dip in revenues in H1FY21), we expect revenues to increase at a CAGR of ~20% over FY21E-23E.

Recovery in travel to drive revenues

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, Accelya is witnessing improved revenues (up 19.6% QoQ in Q2FY21) mainly led by easing of lockdowns across countries and improved volumes in airline industry. Going forward, we expect Accelya to register improving revenues in coming quarters led by recovery of economy, vaccination and improved volumes in airline segment. Hence, post a dip of 22% YoY in FY21E (due to sharp dip in revenues in H1FY21), we expect revenues to increase at a CAGR of ~20% over FY21E-23E.

Margins to improve over FY22E, FY23E

Accelya has registered EBITDA increase from 18.4% in Q1FY21 to 31.7% in Q2FY2. We believe this is mainly due to lower travel cost, less discretionary spend, lower marketing cost and less facility cost. While some costs are expected to return, we expect some cost rationalisation benefits to stay with the company. Coupled with a gradual improvement in revenues, we expect Accelya to register a 480 bps rise in EBITDA margins to 37.0% in FY21E-23E

Valuation & Outlook

Accelya has been witnessing improved revenues (up 19.6% QoQ in Q2FY21) mainly led by easing of lockdowns across countries and improved volumes in the airline industry. Going forward, we expect improving trend in revenues to continue in coming quarters led by recovery of economy and improved volumes in airline segment. Hence, we upgrade the stock from HOLD to BUY with a revised target price of | 1100 (17x PE on FY23E EPS) (earlier target price | 1070).

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