Shares of RateGain Travel Technologies Ltd have jumped nearly 19 percent in the last six trading sessions after it posted strong earnings for the June quarter. The stock has surged over 90 percent so far this year.
On 7 August the firm reported its earnings. Revenue for the quarter was at Rs 214.50 crore versus Rs 119.30 crore from a year ago. Revenue jumped 80 percent YoY driven by 25% organic growth. Growth was driven by faster growth in Adara and continued demand in DaaS, while Distribution was steady. Net profit jumped over 200 percent YoY to Rs 24 crore.
Brokerage Dolat Analysis & Research has given an accumulated rating on the stock and kept a target price of Rs 520 a share. It says robust Q1 performance and positive megatrend in the travel industry keep Rategain as a good proxy play on the booming Travel theme.
Ebitda margins were flat quarter on quarter at 17.6% higher than analysts estimates of 14.0%. Meanwhile year on year margins jumped 760 bps. This jump was despite the impact of wage hikes and the company’s investments in building sales and marketing teams. Key levers for the margin improvement were higher growth in DaaS, turnaround in Adara and operating leverage, analysts said
The firm expects to beat its previously guided FY24 revenue growth 55-58% YoY (20% organic) and beat its Ebitda margins guidance of 17%. Over the medium term, management expects to deliver 200-300bps Ebitda margin improvement every year and operate at 25-40% Ebitda margin by the time its revenues run rate doubles from current levels. Analysts expect Ebitda margins to reach 20% by FY25ii.
"We believe the company would comfortably exceed FY2024E revenue and margin guidance. We expect RateGain to benefit from expansion of product suite, wallet share gains from weaker players in a fragmented market and growth in spends by travel and hospitality clients", said Kotak Institutional Equities in its latest note.
New contract wins tripled YoY to a record Rs59.30 crore up 43% QoQ, while pipeline remained healthy at Rs360 crore, up 17% YoY. RateGain is open to mergers and acquisitions (M&A) and is also facilitating solutions to raise funds. The board also approved raising of up to Rs6bn through issues of shares by way of a QIP, to build a war chest for potential M&A opportunities.
" We increase our revenue estimates while maintaining margin estimates, leading to FY24ii-26ii EPS estimates increasing by up to 5%. RATE is trading at 32x FY25ii P/E, broadly in line with global avg. peers, but offers revenue/PAT CAGR of 37%/56% over FY23-25ii. We maintain BUY, with a 12-month TP of Rs580 (was Rs510), based on 35x P/E 2YF estimates on roll forward", said IIFL in its latest note.
Analysts said Rategain continues to be favorably placed in benefiting from revival in travel, tourism and hospitality demand. Quality of offerings, improved pipeline and net customer addition bode well for Rategain. Growth acceleration along with margin expansion raises confidence in improving acceptance of the company's solutions, analysts added.
"For FY24 and beyond, we continue to expect improving performance, for both top-line and bottom-line. We expect Rategain to deliver 26% revenue CAGR over FY23-FY30 with Avg EBIT margins of 18%, factoring these we maintain Accumulate rating on the stock with a DCF based TP of Rs.520 per share (implies ~42x on FY25E Earnings)", Dolat report added.
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