RateGain Travel Tech: Core business strong, M&A optionality in play

15 Mar 2024 , 12:06 PM

Analysts of IIFL Capital Services recently hosted Mr Bhanu Chopra, Chairman, MD & Founder and Mr Divik Anand, IR — for investor meetings. RATE continues to benefit from the strength in travel demand globally and is augmenting its bouquet of offerings. The Adara acquisition continues to surprise positively, while its DaaS segment is benefitting from healthy demand. Strong order book (71% YoY) and expanded pipeline (57% YoY) in 3Q provide comfort for the sustainability of growth momentum. Management reiterated FY24 revenue guidance to ~69% YoY (20-25% organic) and margin guidance of 19.5%. Additionally, management reiterated the aspiration to double revenues over FY24-27. Analysts of IIFL Capital Services believe the recent fund-raise has given it ammunition to acquire distressed assets with complimentary capabilities; thereby providing value-creation optionality. Management is confident of closing an acquisition in the near term. Analysts of IIFL Securites 12-month TP of Rs950 is based on 2YF P/E of 40x (28% upside). Maintain BUY.

Continued traction across DaaS and Adara:

Management continues to see strong demand for travel across key geographies, which combined with strong deal wins and pipeline, gives them confidence of delivering ~69% YoY revenue growth in FY24. Growth in Distribution is muted, but is expected to pick up. Management expects margins to continue to expand and reach ~25% by FY27; though at a slower rate now.

Strong balance sheet provides accretive-acquisition optionality:

RATE’s M&A playbook has helped it build capabilities and scale revenues. Given its track record of turning around the acquired entities, analysts of IIFL Capital Services believe that the recently-completed QIP provides the optionality for another value-accretive acquisition — if done at reasonable valuations. As per management, they are confident of closing an acquisition in the near term.

Product demo day takeaways:

At its product demo day on March 14, management highlighted how they are constantly investing in R&D across its segments, so as to address various pain points of customers. Adara continues to benefit from innovative ways of monetising its unique global travel intent data. New and upgraded products like Navigator (Actionable insights for evolving needs of the hotel commercial teams) and UNO (Digital marketing platform to boost hotel’s direct demand) are seeing good traction in the market.