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Sharp rebound in air travel leads healthy profitability...

About the stock: Easy Trip Planners or EaseMyTrip.com (EMT) is the fastest growing and only profitable company in the online travel portal in India. The company offers a comprehensive range of travel-related products and services for end-to-end travel solutions, including airline tickets, hotels and holiday packages, rail tickets and bus tickets.

* Airline tickets accounted for 94.0% of revenues (pre-Covid levels) while hotels & other services contributed 5.4% & 0.6% of revenues, respectively

Q2FY22 Results: EMT reported a healthy set of numbers for Q2FY22.

* Revenue increased 339% YoY, 134% QoQ to | 43.7 crore. A sharp rebound in the domestic air traffic post easing of restrictions and low base effect led to such robust growth

* Gross bookings revenue (GBR) for Q2FY22 was at | 895 crore vs. | 339 crore in Q2FY21, up 164% YoY, | 357 crore in Q1FY22, up 151% QoQ

* Further, the cost control measures adopted during Covid times led to EBITDA margin of 47.6% (vs. 27.7% in Q1) while Q2FY22 profit of | 27.2 crore surpassed full year profit of | 24 crore for FY19

* The board has declared an interim dividend of | 1/share

What should investors do? We like EMT for its user friendly platform, unique travel offerings, low cost business model and healthy financial position.

* Considering strong growth potential of this technology platform in travel, we maintain our BUY recommendation

Target Price and Valuation: We value EMT at | 670/share, valuing at 40x FY24E EPS (i.e. implied PEG ratio of 0.9x).

Key triggers for future price performance:

* Online travel market in India is set to double over the next five years to $31 billion in FY25E, growing at 14% CAGR from FY20 levels

* Lean cost model and no convenience fee strategy remain key pillars supporting such rapid, profitable growth. This has also led to stickiness by customers with healthy repeat transaction rate of ~86% in the B2C channel

* Now, with airlines allowed to operate at their full capacity, we expect further traction in the company’s revenues and profitability, going ahead

* Further benefits would accrue from segments like international air, hotels and bus booking over the next three to four years, which are high margin business but currently having online penetration below 20% levels

* Gross booking revenue (GBR) for H1FY22 was at | 1,251 crore. With better traction, we raise GBR estimates to | 3300 crore for FY22E vs. | 2700 crore projected earlier

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