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Robust organic expansion in International H&P

TBO’s consol. GTV grew 24.0% YoY (flat QoQ) to INR 79.4bn in 2QFY25, broadly in-line JMFe. While Hotels & Packaging (H&P) segment grew a robust 55.6% YoY led by strong organic expansion in International source markets (33% growth) and consolidation of JumboOnline (acquired in Dec’23), the Air ticketing segment declined 4.2% YoY due to weakness in domestic air. On the margins front, TBO reported solid gross margin expansion of around 360bps YoY due to business mix moving towards H&P. Despite this expansion, EBITDA margin was down ~140bps YoY to 18.4% (missing JMFe of 19.3%) due to growth investments in International markets. Going ahead, while we expect the air ticketing segment to continue to be a drag, robust H&P expansion should ensure that the company delivers 20%+ topline and 30%+ bottom-line growth over the medium term. We rollover and retain BUY with Dec’25 TP of INR 2,020 derived basis 50x NTM PER (current PER of 53x/39x FY26/27).

* Robust growth in H&P segment, air ticketing weakness continues: TBO’s consol. GTV grew 24.0% YoY (flat QoQ) to INR 79.4bn in 2Q, broadly in-line JMFe. Segment-wise, Air ticketing GTV missed JMFe by ~2% while H&P GTV was in line with our forecast. Organically, H&P grew 33% YoY led by robust trends in APAC, Europe, LATAM and Middle East markets, as per the management. Further, Europe has now become the largest international source market for the company. Jumbonline’s GTV contribution stood at INR 6.75bn in 2Q vs. INR 8.14bn in 1Q. Consol. revenue grew 27.9% YoY to INR 4.51bn (4.2% ahead of JMFe), led by H&P (+36.2% YoY). Gross take rates in the Air segment stood at 2.60% vs. 2.63%/2.46% in 1QFY25/2QFY24, respectively, whereas in H&P segment take rate was 7.59% vs. 7.13%/8.67% in 1QFY25/2QFY24. Inorganic contribution (from JumboOnline) stood at ~INR 6.75bn/INR 0.34bn to consol. GTV/revenue, respectively.

* Gross margin see robust expansion but growth investments affect EBITDA margin: Consol. gross margin was up 361bps YoY (+107bps QoQ) to 67.9%, a beat on our estimate of 66.4%. Air segment margin stood at 46.1% vs. JMFe of 50.0% while H&P segment margin stood at 72.4% vs. JMFe of 70.0%. Growing contribution of H&P in the revenue mix continues to support gross margin profile of the company. However, EBITDA margin was down 139bps YoY (-40bps QoQ) to 18.4% (a miss on JMFe of 19.3%), due to the company’s focus on investing in growth, particularly the International H&P segment, where the company is expanding its sales teams. As a result, EBITDA growth was limited to 18.9% YoY to INR 829mn (+5.4% QoQ). PAT stood at INR 601mn, a miss on JMFe of by c.7%, on account of lower-than-expected other income.

* Rollover leads to TP change to INR 2,020, maintain BUY: We moderate our FY26/27 Air segment GTV/Revenue estimates basis by 2-4% basis continued weakness in the last few quarters while trimming EBITDA margin by 15-75bps over FY25-27 due to accelerated growth investments. On the other hand, H&P take rates are raised by 20bps. Overall, this leads to ~2% cut in our EBITDA for FY26/27. Our EPS estimates, however, are down

~4.5% over FY25-27E due to lowering of treasury income as well. However, as we rollforward to Dec’25, our TP increases to INR 2,020 (vs. INR 1,950 earlier). We maintain BUY.

* Key highlights from conference call:

1) International GTV growth on an organic basis (i.e., without JumboOnline) was 33% YoY. 2) Gross take rate in the H&P segment is expected to be range-bound between ~7.2-7.6% in the near to medium term. 3) Direct sourcing in H&P segment currently stands around 33-35%. The company expects it to be range bound in the short to medium term. While direct sourcing can be margin accretive at times, it comes with additional cost of acquisition. 4) The company will continue to invest in driving topline growth, while maintaining adj. EBITDA margin in the range of ~20%. 5) Despite slowdown in global travel, the management continues to expect strong growth trends to continue for TBO as a) it focused on aggregating existing travel demand; and b) its size is relatively small in comparison to the large TAM. 6) Jumbonline is heavily dependent on summer inbound traffic in Europe. Since revenue is recorded when bookings are made instead of at the time of check-in, Jumbonline records a seasonally strong 3Q and 4Q, as Europe bookings are made well in advance. 7) The company is investing in new initiatives including H-Next (fast-paced booking engine for complex queries) and AI adoption (AI-driven pricing and automation of back-end customer support). 8) APAC was the fastest growing market for the company but on a low base, while the Middle East grew in strong double digits despite a high base.

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