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YTRA: Topline Recovery, Omicron Not Too Bad Impact So Far and Additional Listing on India Stock Exchanges Appears Likely

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By T. Moore, CFA

NASDAQ:YTRA

READ THE FULL YTRA RESEARCH REPORT

September Quarter Financial & Operational Results

Yatra Online, Inc. (NASDAQ:YTRA) announced its second fiscal quarter financial and operational results. September Quarter adjusted revenues grew 107% and beat our estimate by 10%.

Air passenger travel grew 93% in September quarter for YTRA, which outpaced the industry in the quarter. Hotel Room Nights increased 640% for YTRA.

Positive adjusted EBITDA again despite investing the freight forwarding service and logistics.

We forecast $2 million adjusted EBITDA for this fiscal year and $13 million for March 2023 fiscal year.

 

Omicron variant of the COVID-19 has been a scare for the world since late November. Omicron negatively impacted bookings for Yatra in the first two weeks of December (-20% from November), but bookings have improved over the past week.

Fundamentally, travel bookings were strong in July through November before the Omicron variant emerged. Bookings partially bounced back over the past week.

We believe that the rising vaccination penetration in India, with 60% of the population having received at least one dose and 40% of the population with two doses, is helping the mental willingness to travel. Most workers in India have been back in offices since September. Road traffic is back to normal levels.

Corporate bookings grew 81% in November from September and have ample recovery potential because Corporate revenues are at only 50% of pre-COVID levels. Based on indications from its largest corporate customers, the management team believes that Corporate Travel could have been on track to recover to 75-90% of pre-pandemic levels by spring 2022 if Omicron had not occurred. We think this got pushed out three to six months because of Omicron.

In the meantime, YTRA is signing up new corporate customers including 20 new ones in the September quarter.

International travel revenues for YTRA are still extremely below its pre-COVID levels because of restrictions to and from other countries. Possibly $25 million of missing revenues for recovery later.

Freight could achieve $4-5 million revenues next year ($2m this year) and $9m in calendar 2023.

Additional Listing of the Stock on India Exchanges

Yatra Online has evaluated an additional listing on India stock exchanges. We expect the company to file for it by mid-January and for it to begin trading next summer if regulatory approval. Acting as a catalyst to attract more investors for a re-rating acceleration of the stock and access to capital.

We envision retail investors located in India, like mom and pops, buying shares if it were to list there also. Currently, retail investors in India are unable to buys shares of YTRA. Brand name recognition from consumer usage could help. Mutual funds in India might also become attracted to local shares if increased sellside coverage from India-based analysts. Access to capital could also improve.

Valuation:

We value YTRA using a peer comparables valuation methodology based on EV/Sales for 2022 estimates. We expect YTRA to begin generating positive annual adjusted EBITDA this fiscal year.

$4.25 price target valuation for YTRA using a peer group average of 3.1x EV/Sales 2022 and applying a 10% discount for micro cap size, single country risk and corporate governance.

The stock is trading at 1.2x our calendar 2022 EV/Sales estimate, which is a 62% discount to peer group. 7.9x EV/Adjusted EBITDA calendar 2022 is also a 62% discount to peers.

We expect a re-rating to narrow YTRA’s relative valuation gap as travel picks up in India more despite Omicron and COVID-19 pandemic. Many people are back in work offices in India and corporate travel could have another step-up in March-June like it did in October and November.

Additional listing of the stock on two major India stock exchanges could accelerate the re-rating.

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