JM Financial Sees Upside To Yatra Online’s Stock, Says Co To Tap B2E Exposure To Grow Further

Brokerage JM Financial has initiated coverage on Yatra Online’s stock with a ‘buy’ rating and set a target price of INR 220 per share, indicating an upside of 28.2%. 

JM Financial believes that the traveltech major is well placed to reap the benefits of its massive exposure to the business-to-employee (B2E) segment, which other online travel aggregators (OTAs) hardly serve in the booming travel market.

The brokerage said in a research note on Yatra that OTAs today address only a fraction of the total travel demand, and a decent proportion of the demand is fulfilled by offline marketplaces, which serve the B2E and B2B2C customers. 

“In the medium term, we see Yatra’s B2E exposure expanding faster than online due to the management’s focus on improving enterprise market share that, in turn, should aid margin expansion,” said analysts at JM Financial.

The analysts noted that Yatra is the largest enterprise travel platform on the basis number of corporate clients and the third largest player in the online channel, while having a “good” catalogue of hotels and accommodations. 

“The INR 6 Bn+ (INR 600 Cr) fundraise during its India listing could be a game-changing event for Yatra, as for the first time since inception the management can now entirely focus on driving growth and market share gains through superior execution,” JM Financial said. 

“The company should benefit from the fact that competitive intensity is now relatively benign in the B2C segment whereas the B2E segment is ripe for consolidation by organised players.”

It is pertinent to note that Yatra got listed on the US stock exchange in 2016. The company saw a muted listing on the Indian bourses last year in September. However, in the last four months, the shares have gained 32% on the BSE, crossing its issue price of INR 142.

Yatra shares are currently trading at INR 171 level on the BSE.

Reviewing Yatra’s past, JM Financial noted that Yatra’s ambitions in the travel-tech space were curtailed by high competitive intensity and funding woes when looked at it historically. 

Ebix’s failed M&A attempt and the challenges of the Covid-19 pandemic had added to the company’s difficulties, which also led to Yatra failing to grow in line with the competition for more than a decade and could not become self-sustainable, said the brokerage.  However, Yatra today is the largest enterprise travel platform, it noted.

“Yatra is the largest player in the enterprise travel space with a market share of 6%, calculated based on 800+ enterprises that the company services out of a total of 13,000 mid-large enterprises in India. In fact, all TMCs (including Yatra) put together cater to about 20% of the enterprises, while about 30% of enterprises manage their travel requirements on their own. This means only half of the mid-large enterprises use organised channels for their travel needs. The remaining enterprises are primarily dependent on small, unorganised travel agents,” said JM Financial.

It sees only organised players with strong balance sheets to leverage this advantage to expand their corporate customer base. Yatra is best placed to accelerate such consolidation, the brokerage said.

JM Financial also sees Yatra’s adjusted profit after tax (PAT) improving from around INR 10 Cr in FY23 to INR 86.6 Cr in FY26.

The brokerage remains positive even though Yatra has recently witnessed a degrowth in its bottom line on a quarter-on-quarter (QoQ) basis. In Q4 FY23, the OTA had posted a PAT of INR 9 Cr, which declined to INR 6 Cr in Q1 FY24.

In the last reported quarter, Q2 FY24, Yatra slipped into red with a net loss of INR 17.1 Cr.

JM Financial’s initiation on the OTA comes ahead of its Q3 FY24 earnings announcement, which is scheduled for Wednesday (January 31).

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