Buy Yatra Online Ltd for the Target Rs 135 by Motilal Oswal Financial Services Ltd
Performance below expectation; recovery likely from 2HFY27
* Yatra’s performance was below expectations across parameters, driven by elevated fares, the impact of the war, and cuts in corporate discretionary spending.
* 1Q revenue stood at INR1,879m (est: 2,072m), EBITDA stood at INR124m (est: 141m), and PAT stood at INR3m (est: 90m).
* Irrespective of a challenging quarter, Yatra’s air passenger volumes increased 5% YoY, almost twice the industry growth rate, indicating continued market share gains despite capacity constraints and elevated fares.
* Total gross booking value stood at INR21,007m, rising 17% YoY, led by an 18% YoY increase in the Air segment, while Hotel segment bookings grew 13%.
* We believe Yatra’s performance will improve from 2HFY27 on the back of pent-up travel demand and recovery in the MICE segment. Over FY26-28, we expect the company to deliver a CAGR of 15%/30%/29% in Revenue/EBITDA/PAT, mainly due to increased contribution from the Hotel and MICE segments to revenue and bookings. We reiterate our BUY rating on Yatra with a TP of INR135, valued at 25x FY28E EPS
Temporary revenue and margin pressure; growth drivers remain intact
* Gross air bookings grew ~18% YoY to ~INR16,579m, while passenger volumes increased ~5% YoY, nearly twice the industry growth, despite elevated fares and capacity constraints.
* Air gross margin contracted to 4.2% from 4.6%, mainly due to delayed airline incentive finalization and capacity constraints. Management expects air margins to expand in 2HFY27 as capacity normalizes and incentive programs are finalized.
* Hotels & Packages gross bookings grew ~13% YoY to ~INR3,876m, with ~30% growth in room nights. Hotel gross margin expanded 24% YoY to INR386m, with margin expanding to 9.95% from 9.05%.
* Management remains focused on expanding hotel supply, with the Air & Hotel mix currently at ~60:40 at the gross-margin level. Given the faster 30%+ hotel growth, Yatra remains on track to achieve a 50:50 mix over the next 2–3 years, supporting better diversification and margins.
* Restructuring/merger remains a key value-unlocking opportunity, aimed at creating a more liquid and efficient India-listed structure, though the timeline remains uncertain due to regulatory approvals.
* Management remains constructive despite no FY27 guidance, citing stronger 2Q MICE bookings, recovering corporate travel, strong hotel growth, and expanding Air margins, while TravelPro, Kanoo, AI, and expense management could support future growth.
* MICE is lumpy and seasonal, expected to contribute around 20–25% annually. Therefore, performance should be assessed on a YoY basis rather than QoQ basis, and the current weakness does not appear to be structural
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