ixigo IPO to put spotlight on Easy Trip, Yatra; Are they worth your money?

ixigo share price: Analysts caution against chasing the momentum in the online travel agencies, given the cyclical nature of the travel industry

ixigo share price update: Shares of ixigo-parent Le Travenues, an online ticket booking platform and travel agency, turned heads with a sharp run-up since their listing. The online travel agency (OTA) Le Travenues soared 78 per cent on the stock market debut day (June 18), surging 80.4 per cent in three days over its issue price.

Analysts, however, caution against chasing the momentum in the pack given the cyclical nature of the industry these tech-based ticket booking and travel agencies operate in, coupled with rich valuations than the benchmarks.

"Post the general elections, we are witnessing continuity of the bull run in both secondary and primary markets. The kind of run-up that ixigo shares saw was an impact of it. Investors, however, must remember the uncertainty that pertains in such tech-enabled, travel-based companies because of the seasonality in the tourism industry," said Narendra Solanki, head of fundamental research (investment services) at Anand Rathi Shares and Stock Brokers.

In fact, analysts believe investors' strong response to ixigo could lead to greater scrutiny of the financial performance of Easy Trip Planners, and Yatra Online. The stocks' potential re-rating, they said, would hinge on their individual quarterly performance and growth strategies.

They suggest short-term investors to partially book profit or follow strict stop-losses in these counters, whereas long-term investors are advised to hold the stocks.

"Given the expensive valuations of ixigo, new investors may adopt a wait-and-watch approach. While existing investors can consider holding their positions, further buying at this price point could be risky," said Shivani Nyati, head of wealth at Swastika Investmart.

Meanwhile, Yatra Online's FY24 loss and stagnant revenue growth makes it a less attractive proposition. Investors, she added, should stay on the sidelines.

"As for Easy Trip Planners, the profitability and healthy revenue growth present a relatively compelling case. However, a cautious approach should be taken here as well," Nyati said.

On the bourses, Easy Trip Planners and Yatra have underperformed the markets thus far in the calendar year 2024 (CY24). The former has risen 6.43 per cent and the latter has shed 10.8 per cent year-to-date (YTD), as against an 8.4-per cent gain in the benchmark Nifty50 index.

Pricey valuations

Le Travenues reported a net profit of Rs 65.7 crore for the nine months ended December 2023, with revenue from operations worth Rs 491 crore.

Its profit margin stood at 13.38 per cent during the period, marking a sharp improvement over the margin of 4.67 per cent clocked in FY23.

As per the pre-IPO report by Anand Rathi, the company's estimated price-to-earnings (P/E) for FY24 (calculated on the estimated earnings per share of FY24 and post issue no. of equity shares issued) was 150x. They expect this ratio to have risen post the bumper rally.

Meanwhile, Easy Trip Planners reported a net loss of Rs 15 crore for the fourth quarter of financial year 2023-24 (Q4FY24) as against a profit of Rs 31 crore in Q4FY23.

For the entire FY24, net profit was Rs 103.17 crore, with an EPS of Rs 0.58. Against this, its blended twelve month (BTM) P/E stands at 33.8x.

Yatra Online, on the other hand, reported a net profit of Rs 5.6 crore in Q4FY24, but a net loss of Rs 4.5 crore for the entire financial year. Its profit margin was (-)1 per cent for the year and EPS of (-)Rs 0.33. Its BTM P/E stands at 32.1x at present.

By comparison, the current BTM P/E for the benchmark Nifty50 stands at 20.2x.

"There has been a lot of buying interest in tech-enabled travel agencies, off late, largely with a futuristic view. Given their valuations, however, these stocks are suitable for long-term investors, having a high-risk appetite," said Kranthi Bathini, director-equity, WealthMills Securities.