TCOM has deferred its ambition of doubling data revenue to INR280b by one year to FY28, which implies a 3-yr CAGR of ~13% (vs. ~19% CAGR target over FY23-27 earlier). We believe the revenue goal is more credible (vs. FY23), though a tad optimistic and higher than our estimate (~8.5% CAGR or INR250b by FY28). Management aims to increase the share of its digital portfolio to 65% (vs. ~47% currently), which implies acceleration in digital revenue CAGR to ~26% (vs. ~25% CAGR over FY21-25, including large acquisition). We build in ~12% CAGR in digital portfolio over FY25-28 with share rising to ~52%. Moreover, management has reiterated its guidance of returning to 23-25% EBITDA margins and 25%+ RoCE over the medium term through improvement in digital margins to double digits (~INR15b EBITDA contribution, vs. ~INR9b loss currently).
OutlookAfter significant time correction (5% return since 2023 analyst meet), valuations are now reasonable. However, we maintain our Neutral rating on TCOM with an unchanged TP of INR1,660 as we await acceleration in revenue growth, along with margin improvement in digital portfolio, before turning more constructive.
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