Digital Corporate Travel Shift Will Drive Long-Term Upside For This Online Platform

Catalysts

About Yatra Online

Yatra Online is a leading Indian travel platform providing corporate travel management, consumer travel bookings, and high margin hotels, packages and MICE services.

What are the underlying business or industry changes driving this perspective?

• Accelerating shift by Indian enterprises to digital travel and expense automation, where Yatra already leads in corporate travel, should support continued market share gains and double digit growth in corporate revenue while leveraging a largely fixed technology cost base to enhance EBITDA.
• Rising demand for branded hotels, curated packages and experiential stays, combined with Yatra’s focus on Hotels, Packages and MICE, is likely to increase the mix of higher margin segments and expand net margins and earnings despite modest ticketing volume volatility.
• Low online penetration in the roughly USD 20 billion corporate travel market in India, at about one fifth of the segment, provides significant runway for digital adoption that can drive sustained growth in adjusted revenue and operating leverage as volumes scale.
• Ongoing enhancements to Diya AI, self booking tools and redesigned hotel interfaces aimed at transparency and conversion should lower customer acquisition costs, lift repeat usage and improve both revenue per booking and overall profitability.
• Corporate restructuring efforts designed to create fungibility between U.S. and Indian listings and simplify the multi jurisdiction structure can narrow the valuation gap to peers, lower the cost of capital and improve per share earnings accretion from future growth.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Yatra Online's revenue will grow by 5.2% annually over the next 3 years.
• Analysts assume that profit margins will increase from 0.3% today to 24.4% in 3 years time.
• Analysts expect earnings to reach ₹2.9 billion (and earnings per share of ₹46.08) by about December 2028, up from ₹35.1 million today.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 8.2x on those 2028 earnings, down from 249.8x today. This future PE is lower than the current PE for the US Hospitality industry at 21.2x.
• Analysts expect the number of shares outstanding to grow by 0.69% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 11.56%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Corporate and consumer travel demand in India may grow more slowly than the current high single digit to low double digit expectations due to macroeconomic weakness or policy changes, which would pressure Yatra Online's ability to sustain 48.5% revenue growth and reduce long term revenue expansion and earnings scalability.
• Intensifying competition from larger online travel agencies and global platforms that are also investing in corporate tools and branded hotels could compress pricing power and marketing efficiency, eroding adjusted margins in air ticketing and Hotels and Packages and limiting net margin expansion.
• Yatra's dependence on rapid digital adoption, including self booking tools and Diya AI, may face slower than anticipated enterprise uptake or technological disruption, which would cap corporate client additions and reduce operating leverage, constraining adjusted EBITDA growth and long term earnings.
• Restructuring complexity across Cayman Islands, Cyprus, Singapore and India, including uncertain regulatory approvals and timelines for creating fungibility between U.S. and Indian shares, could prolong the valuation discount, increase compliance and advisory costs and dilute per share earnings accretion from future growth.
• Volume and mix dynamics, such as declining ticketing passenger volumes of 3.5% year on year combined with lower adjusted margin percentages in Hotels and Packages from 10.9% to 10%, suggest that any sustained shift away from higher margin segments or weaker conversion could stall margin expansion and weigh on net margins and overall earnings.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of $2.99 for Yatra Online based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be ₹11.8 billion, earnings will come to ₹2.9 billion, and it would be trading on a PE ratio of 8.2x, assuming you use a discount rate of 11.6%.
  
• Given the current share price of $1.7, the analyst price target of $2.99 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.