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Yatra reported mixed results in 3Q, as better-than expected expansion in GBR and revenue was offset by weaker-than expected margins. Consol. GBR growth was strong at 17.8% YoY and ahead of JMFe of 13.4%. Growth was driven by the Air segment (+21.5% YoY), on the back of 26% YoY growth in domestic air passengers, c.3x the industry. This indicates the company gained meaningful market share despite corporate business being impacted due to muted spends by IT/ITeS clients. On the other hand, the performance of Hotels & Packages (H&P) segment was muted (+2.8% YoY). Consol. Revenue growth of 23.1% YoY was robust and well ahead of JMFe due to healthy gross take-rates across Air and H&P segments. Adj. EBITDA margin, however, was well below expectation at 9.1% (-410bps YoY) vs. JMFe of 14.8% on account of sharp rise in service costs (due to festive season) and a one-off expense. The company closed 26 new corporate accounts with annual billing potential of INR 2.24bn, indicating continued traction in the B2E space. Gross debt was down by 51% QoQ to INR 850mn, which should help improve PAT profitability hereon.

* Air segment drives strong top line growth: Gross booking revenue (GBR) in 3Q increased by 17.8% YoY (+6.3% QoQ) to INR 18.6bn, a beat of c.4% on JMFe. Growth was led by the Air ticketing segment, which grew 21.5% YoY (+9.0% QoQ) to INR 16.1bn, a beat on JMFe by 6.8%. However, H&P segment expanded only 2.8% YoY (-9.3% QoQ) to INR 2.0bn, missing JMFe by 11%. The management noted that this muted performance in H&P, despite an uptick in leisure and personal travel, was attributable to weakness in corporate travel bookings. Nevertheless, Consol. Revenue was up 23.1% YoY (+17.2% QoQ) to INR 1.1bn, led by 18.6%/17.9% growth in Air and H&P segments, respectively.

* Adj. EBITDA margin was below expectation: While top line was well ahead of JMFe, operating margin was below our estimate. The management noted that 3Q typically sees higher contribution from the packages business that, in turn, drives up its service costs (1.4% of GBR in 3Q vs. 0.9%/1.2% in 2QFY24/3QFY23). Further, other operating costs too increased to 1.3% of GBR (vs. 1.1%/1.2% in 2QFY24/3QFY23) due to one-off increase in legal and professional expenses. Consequently, Adj. EBITDA margin of 9.1% was below JMFe by 567bps, whereas Adj. EBITDA of INR 100mn (-15.1% YoY, -5.1% QoQ) missed JMFe by 32%. During the quarter, reported EBITDA was INR 36mn (flattish QoQ), while margin stood at 3.3% (-86bps QoQ). Management commentary suggests that a slight trade-off in profitability in lieu of market share gains is possible in the near term. Having said that, we expect scale leverage to help drive 500bps+ Adj. EBITDA margin improvement over FY23-26.

* Maintain ‘BUY’, TP unchanged at INR 220: We forecast Yatra’s Adj. EBITDA to expand at a CAGR of c.28% over the next 3 years. Further, recapitalisation has helped Yatra repay some of its high-cost debt and that should lead to significant savings in finance expenses. As a result, we expect Yatra’s Adj. PAT to improve from ~INR 100mn in FY23 to INR 867mn in FY26. We maintain ‘BUY’ with an unchanged Mar’25 TP of INR 220, basis unchanged PER of 40x.

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