Make My Trip (MMYT) $88
What’s to like:
Secular growth in Indian tourism. That’s likely to last several years, less cyclical.
High awareness of brands.
20% Three Year Forward Rev Growth consensus estimates
Turned the corner – first year of Operating Profits of $56Mn on $782Mn in revenue or 7% operating profit margins and $125Mn operating cash or 16% cash flow margin.
Management emphasized profitability from the entire industry, which should curtail some of the undercutting…Online travel booking can be a commodity, so this will help.
Risks and challenges.
Cyclicality – From 2015 to to 2018 (March Y/E) Make My Trip grew revenue from $295Mn to $658Mn, then drop 2 years in a row to $475Mn by March 2020 – Pre covid there was a slowdown in travel. Post Covid it has recovered strongly to $792Mn in revenue last year.
Market returns were commensurate with this performance – the stocks best performance was in the past 12 months returning 183%, the vast majority of the 219% of the last 10 years. Simply, the market has discounted some the 20% growth of the next 3 years.
Overall revenue growth from 2015-2024 was 10%, more like the industry average, and 20% forward growth will put it in a different league.
Valuation: 10X sales with 20% growth, it’s not a profit story yet. That’s a P/S growth ratio of 0.5, ideally, I like to get in below 0.3 for a better margin of safety, unless the cash flow or operating profit is growing very strongly.
It’s a good story, well managed, strong branding, market leadership and lots of growth ahead – valuation is a bit stretched because of secular growth Indian travel story 2X its normal multiple. Buying on declines and averaging it would be better.