Online travel agency Easy Trip Planners has given superior returns since listing on March 19. The stock has rallied more than 220 percent in the last six months to Rs 599, becoming the third-largest biggest gainer among the IPOs listed this year. The other two are Nureca (up 317 percent) and Laxmi Organic Industries (up 315 percent).
The stock has outperformed the Nifty50, which gained 19.5 percent, and the Nifty Midcap 100 index, which surged 26.5 percent, in the last six months.
A strong financial performance, further easing of travel restrictions following the strong vaccination drive, operational efficiency, and expansion of international footprints are some of the key reasons behind the rally.
“The company has widened its international footprint by incorporating wholly owned subsidiaries in the Philippines, Thailand, and US. It expects to benefit from a huge pent-up demand for travel, globally, as restrictions are lifted and vaccination drive gathers momentum," said Ankur Saraswat, Research Analyst, Trustline Securities.
Cost rationalisation, increase in efficiencies, rising disposable incomes and deeper penetration of travel into lower tier towns will drive the company’s future growth, he said.
Gaurav Garg, Head of Research, CapitalVia Global Research, agreed that the stock started zooming after the relaxations in Lockdown 2.0 restrictions.
"The major reason for the company’s success seems to be its financials. The company has posted about 85 percent growth in profit for FY21. The reason for the increase in profitability, despite lower income, was mainly the increase in margins and commissions, and reduction in operational expenses," he explained.
EaseMyTrip.com had reported a massive 85 percent jump in profit at Rs 61 crore in FY21, compared to the previous year, despite lower bookings in the pandemic year. But revenue fell 24.5 percent YoY to Rs 106.71 crore in FY21.
In fact, it is one of the few internet travel companies to be profitable, Vivek Gupta of GEPL Capital said.
In the first quarter of FY22, the company clocked almost a 518 percent jump in profit, despite the second wave disruptions in the travel industry, to Rs 15.4 crore, compared to Rs 2.5 crore in the corresponding period of last fiscal. Revenue during the quarter jumped 425.6 percent YoY to Rs 18.7 crore.
Where can the stock go from here?
The stock looks expensive, given the stellar rally from its issue price. However, considering the revival in the travel industry, it can go up to the Rs 1,000-mark in the next 6-8 months (medium term) and Rs 820-880 in the short term.
"The P/E multiple of the stock is 115.16 times, as of now. In the short- to medium-term, this does look expensive. However, with the revival of travel, earnings may rise. The return on capital employed (ROCE) of the company is 65.5 percent, and, therefore, the overall outlook of the stock looks positive," said Garg of CapitalVia Global Research.
“The stock has given a flag pattern breakout on the daily charts and it may cross the Rs 1,000 level in 6-8 months, after a minor profit-booking. Our target price for the next 6-8 months is Rs 1,025," he said.
According to Saraswat of Trustline Securities, the stock is expected to test the Rs 820-880 level in the short term. It has a strong support around the Rs 540-580 level. Gupta of GEPL Capital feels the stock could touch Rs 1,000 but he is not sure of the time period. "Considering it is 70 times of March 2021 sales, it is not cheap," he said.
Easy Trip Planners launched its Rs 510-crore initial public offering in March 2021 and saw a huge subscription of 159 times, but had a muted listing amid weak market conditions.Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.