Expansion Into Dubai And Launch Of ScanMyTripcom Will Strengthen Future Prospects

Key Takeaways

• Diversification through non-air services and innovative platforms is driving growth, reducing dependency on traditional offerings, and increasing market share.
  
• Strategic partnerships and international market expansion are enhancing customer reach, bolstering revenue streams, and supporting new sector initiatives like electric vehicles.
  
• Increased expenses, high competition, strategic uncertainties, and limited market perception challenge Easy Trip Planners' profitability, investor confidence, and share performance.

Catalysts

Operates as an online travel agency in India, the Philippines, Singapore, Thailand, the United Arab Emirates, the United Kingdom, New Zealand, and the United States.

• Expansion in Non-Air Business: Easy Trip Planners is focusing on diversifying its offerings, especially in the Hotels and Holiday Packages segment, which saw significant growth. This diversification is likely to drive future revenue growth as the company reduces reliance on its traditional air services.
  
• International Market Growth: The company is making headway in key international markets like Dubai, which is expected to bolster revenue streams as they capitalize on global travel opportunities.
  
• Strategic Partnerships and Collaborations: Collaborations such as the exclusive agreement with PhonePe and partnerships like the one with Bank of Baroda are designed to enhance customer reach and convenience, likely boosting revenues and earnings.
  
• Launch of Innovative Platforms: The introduction of India's first metasearch engine, ScanMyTrip.com, integrated into ONDC, offers unique market positioning which could increase market share and ultimately drive revenue growth.
  
• Entry into the Electric Vehicle Market: Initiatives like Easy Green Mobility demonstrate a commitment to new growth sectors, with the potential to diversify revenue streams and eventually contribute positively to net margins and earnings.

Easy Trip Planners Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Easy Trip Planners's revenue will grow by 12.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from 14.2% today to 37.4% in 3 years time.
• Analysts expect earnings to reach ₹3.3 billion (and earnings per share of ₹0.75) by about February 2028, up from ₹882.5 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 32.9x on those 2028 earnings, down from 47.9x today. This future PE is greater than the current PE for the IN Hospitality industry at 32.8x.
• Analysts expect the number of shares outstanding to decline by 1.8% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 15.11%, as per the Simply Wall St company report.

Easy Trip Planners Future Earnings Per Share Growth

Risks

• The company's PAT for Q2 FY '25 has significantly decreased compared to Q2 FY '24, primarily due to increased employee and marketing expenses and the integration of three new subsidiaries whose revenues have not yet caught up, which could affect margins and earnings.
  
• The promoters have sold a substantial portion of their stake since March 2023, which might raise concerns about their confidence in the company's future growth potential and thus impact investor sentiment and share price stability.
  
• There is high competition in the airline industry, which has increased discounting and impacted stand-alone revenue and segment profit, suggesting potential pressure on net margins.
  
• The ongoing expansion into the electric vehicle and holiday package segments involves capital expenditure and strategic uncertainty, which could strain financial resources and affect future profitability and cash flows.
  
• Despite efforts to grow internationally and diversify, market perception and institutional investor interest remain limited, likely affecting the stock's performance and resulting in stagnant share prices.

Valuation

• The analysts have a consensus price target of ₹21.0 for Easy Trip Planners based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹8.7 billion, earnings will come to ₹3.3 billion, and it would be trading on a PE ratio of 32.9x, assuming you use a discount rate of 15.1%.
  
• Given the current share price of ₹11.93, the analyst price target of ₹21.0 is 43.2% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.