Expanding Corporate Travel Services Will Solidify Future Revenue Streams

Key Takeaways

• The growth in India's outbound travel market presents a significant opportunity for MakeMyTrip to increase international bookings and boost revenue.
  
• Strategic initiatives and technologies enhance user experience, offering pathways for sustained revenue growth and improved net margins.
  
• Intense competition, supply challenges, and economic uncertainties threaten revenue stability, margin pressure, and market share maintenance for MakeMyTrip.

Catalysts

An online travel company, sells travel products and services.

• The growth in India's outbound travel market, projected to be the world's fifth-largest by 2027, presents MakeMyTrip with a significant opportunity to increase its international bookings, thereby boosting revenue.
  
• The company's strategic initiatives, such as introducing part-payment options and value bundles for international flights, are expected to attract more customers and provide flexibility, likely positively impacting earnings.
  
• Investing in consumer-friendly technologies and expanding features like the Gen AI-powered chatbot Myra can enhance user experience and operational efficiency, which may lead to improved net margins.
  
• Expansion into new consumer segments, including spiritual tourism and concerts-driven travel, provides untapped demand, offering a pathway for sustained revenue growth.
  
• Expansion of corporate travel services through acquisitions like the Happy Expense Management platform and making the platform GDPR compliant for global accessibility are steps towards solidifying future revenue streams and international market penetration.

MakeMyTrip Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming MakeMyTrip's revenue will grow by 21.1% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 25.4% today to 14.8% in 3 years time.
• Analysts expect earnings to reach $246.4 million (and earnings per share of $2.26) by about January 2028, up from $237.9 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $273.9 million in earnings, and the most bearish expecting $194 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 71.8x on those 2028 earnings, up from 49.4x today. This future PE is greater than the current PE for the US Hospitality industry at 24.3x.
• Analysts expect the number of shares outstanding to decline by 0.18% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 10.41%, as per the Simply Wall St company report.

MakeMyTrip Future Earnings Per Share Growth

Risks

• The company's future performance is uncertain due to forward-looking statements and inherent uncertainties, which could lead to different actual results, impacting its revenue and earnings stability.
  
• Persistent supply challenges in the domestic air market and unresolved engine issues could constrain growth in air ticketing revenue, potentially affecting overall revenue growth.
  
• Competition from airlines promoting direct bookings and marketing by competitors poses a potential threat to market share maintenance and could result in reduced margins and earnings.
  
• The business's reliance on macroeconomic factors, such as the stability of consumer discretionary spending on travel, makes it vulnerable to economic downturns that could negatively impact revenue and profitability.
  
• The substantial increase in marketing expenses and the need to sustain customer acquisition levels might pressure net margins if not balanced by a proportional increase in revenues.

Valuation

• The analysts have a consensus price target of $120.67 for MakeMyTrip based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $135.0, and the most bearish reporting a price target of just $105.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.7 billion, earnings will come to $246.4 million, and it would be trading on a PE ratio of 71.8x, assuming you use a discount rate of 10.4%.
  
• Given the current share price of $106.96, the analyst's price target of $120.67 is 11.4% 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.