MakeMyTrip Limited (MMYT) on Q2 2021 Results - Earnings Call Transcript
Operator: Good morning. My name is Henry, and I will be your conference operator today. At this time, I would like to welcome everyone to the MakeMyTrip Limited Fiscal 2021 Quarter 2 Earnings Call. All lines have been placed on mute to prevent any background noise. There will be a question-and-answer session. Thank you very much. Now, I would like to turn the call over to our first presenter for today, Mr. Jonathan Huang, Vice President of Investor Relations. Sir, you may begin the conference. Jonathan Huang: Thank you. Welcome everyone to MakeMyTrip Limited's fiscal 2021 second quarter earnings call. I would like to remind everyone that certain statements made on today's call are considered forward-looking statements within the meaning of the Safe Harbor provision of the U.S. Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance, are subject to inherent uncertainties and actual results may differ materially. Deep Kalra: Thank you, John. Welcome, everyone, to our fiscal second quarter earnings call. I sincerely wish all our listeners good health and safety as the world continues to grapple with the ongoing COVID-19 pandemic. It is encouraging that the word over and in India as well. There are multiple vaccines, which are in various stages of trials, promising a cure sooner than later. That should clearly help restore normalcy to pre-COVID-days, something that we are all looking forward to. We at MakeMyTrip continue to believe that the need for travel is innate in humans. And while we are already seeing green-shoots of demand across different travel services, we believe business recovery would significantly accelerate once a vaccine becomes widely available. As for India, recent trends seem to indicate that we are past the peak of daily confirmed COVID-19 infections. It is also helpful that despite having the second largest number of confirmed infections globally, the country's mortality rate is fairly low. This has helped us to get some travelers back and the travel industry is also adapting and innovating to address the concerns of the travelers in such times. While we had updated on the gradual unlocking in the country post May during our last call in August, thereafter, we have seen the unlocking gain for the momentum. As we speak, the country's domestic airlines have been permitted to operate up to 55% of their capacity as in the same period in the prior year by the DGCA which regulates the sector. The actual passengers flown have already recovered to about 40% levels. As for international flights, restrictions remain in place until at least October 31. So many bilateral country bubbles have already been established for special-purpose flights, and new arrangements are currently being negotiated with countries such as Italy, Bangladesh, Kazakhstan and Ukraine. Rajesh Magow: Thank you, Deep. Hello, everyone. I hope everyone is staying healthy and well during this ongoing pandemic. Before I begin, I would like to thank the entire team, who had been working relentlessly during this last couple of quarters in a constrained environment to help with the industry's reopening and slowly bring MakeMyTrip back on the track of business recovery. Let me now share a summary of our fiscal second quarter of 2021, which is the first full quarter along the journey of recovery, as COVID-19 travel restrictions were largely only lifted in June. Since then, we have seen a gradual return of demand with sequential week-on-week improvements that is fairly in line with the lifting of localized restrictions and opening up of all modes of travel and accommodations in the country in a graded manner. Since restrictions were lifted, we were encouraged to see pent-up demand for the short-stay leisure break segment where travelers flocked to nearby getaway destination after having fatigued out due to the severe lockdown conditions in most of Q1. While the pace of recovery remains uneven state by state, we are encouraged to see continued momentum into the beginning of the festive season here in India, where people typically travel to celebrate with friends and families. Now I would like to share some details of our different lines of business fared during the quarter, along with the efforts we have put in to help us maintain the momentum of our recovery going forward. In our hotels business, as mentioned by Deep, currently almost 50% of the properties across our network have resumed operations, and we are seeing domestic demand recovering to almost 30% so far during this festive season. The hotel demand recovery is currently led by short-stay getaway vacations, great travel deals, and naturally hygienically safe properties. Mohit Kabra: Thanks, Rajesh, and hello, everyone. During the second fiscal quarter, our primary focus was to maintain a very tight cost discipline, as we started with the gradual business recovery process, following the various phases of unlock being rolled out by the Indian government. While the overall business recovery in terms of gross bookings for a quarter was about 15%. The recovery in the exit month of September was almost 23%. We are, therefore, hopeful of our business recovery gaining further momentum in the approaching winter quarter. The adjusted operating loss for the quarter at $12.9 million was lower than the previous quarter's loss of $21.3 million, and also better than last year's same quarter loss of $19.3 million. Adjusted further for non-cash depreciation and amortization expenses, the quarter's adjusted cash operating loss is stood at about $7.6 million compared to $16.3 million in the previous quarter, and $14.5 million in same quarter last year. As highlighted by Rajesh, we have seen better business recovery so far in our air ticketing business compared to other business segments. For the quarter, our air ticketing adjusted margin stood at about $11.9 million, which is a recovery of about 19% in constant currency terms versus pre-COVID levels during the same quarter of last fiscal year. The adjusted margin in our hotels and packages business is stood at $5.5 million. It was about $2.5 million for the bus ticketing business, and $3.1 million from other businesses. I'd now like to share some color on our operating cost line during the quarter. We significantly pruned our marketing and sales promotion expenses, which stood at 2.4% of total gross bookings considering that the business recovery during the quarter was very gradual. Our personnel and SG&A expenses stood at about $24.4 million for the quarter compared to about $46.7 million for the same quarter during the last fiscal year, and it's slightly about the $22.4 million during the previous quarter. This small increase was in view of the gradual restoration of salary reductions during the reported quarter for most of our employees, excluding the top management. We do expect to fully restore salary cuts for the entire team by the next quarter. The significant reduction in these costs compared to the last fiscal year, continue to aid our reduction of cash adjusted operating losses. During Q2, we continue to focus on cash management, and ended the quarter with about $198 million in cash and cash equivalents versus about $174 million at the end of June, while we registered, adjusted cash losses of about $7.6 million during the quarter. Our cash balance improvement during the quarter was also aided by the fact that we were able to realize tax refunds from the tax authorities, and we also kind of witnessed significant working capital releases in line with the gradual business recovery. The cash and cash balances that I've called out do not include our secured credit and guarantee facilities of approximately $100 million, which remain fully available to us as and when needed. As the economy continues to unlock and bounce back, we believe we are well placed financially and operationally to benefit from gradually improving demand recovery in the travel sector. With that, I'd like to turn the call over to the operator for any Q&A. Operator: We have our first question. Our first question comes from Vijit Jain of Citi. Your line is now open. Vijit Jain: Yeah, hi, guys. Congratulations on a great set of numbers. Terrific numbers on the adjusted EBIT yet again. My question is about the adjusted margins of the hotels and packages side, so quite a steep drop there. Does that reflect the fact that budget continues to lag premium in recovery in this quarter? Thank you. Mohit Kabra: Absolutely, Vijit, you're quite right. And like we have been calling out, the budget segment kind of continues to lag. In fact, the mix is getting skewed more and more in favor of premium properties. And this is kind of relatable, because this is a period where most customers want to kind of address their concerns around safety, hygiene, et cetera, and believe this is better addressed in the premium properties compared to the budget properties. And therefore, we're kind of seeing much better pickup in the premium properties that we have on the website. So, pretty much coming in from there. Also, we have been kind of supporting some of our partners, in appropriate cases, with reduced take-rates. And that's also kind of contributing in a small way. But predominantly, this is coming in from the change in mix in favor of premium properties. So, to a large extent, I would say probably this is a slightly one-off kind of times. We don't really know, whether this change in mix is kind of here to stay. Probably, we should gradually start seeing more and more recovery coming in the other segment or other price point as well, so probably more transient. Vijit Jain: Right, thank you. And secondly, just a little bit color. I know you mentioned, Mohit, earlier about some income tax refunds and working capital as the reason for the roughly $35-million-, $40-million-odd net change in your cash when you remove the losses. So can you break that up also a little bit for us, the income tax refunds? I don't see that for that in the release? Mohit Kabra: Yeah, sure. Like I mentioned, our overall change in the cash position, if you look at it, is close to about $24 million for the quarter, from about $173 million to about $198 million. Probably, half of this $24 million comes in from income tax refunds that we've kind of received. So that's kind of really helped shore up the cash balances. And the rest is largely a mix of multiple changes on the working capital lines. Vijit Jain: Got it. And my final question to you guys, with COVID levels dropping quite significantly now in India over the past 1 month or so, I know you've commented a little bit about festive season demand and about exit demand at the end of September, but any meaningful pickup you've noticed very recently? And, I mean, I know it's hard to disambiguate between festive demand and overall demand. But I'm just wondering if the behavior change has been quite as fast as the COVID drop has been. Deep Kalra: Yeah, hi, Vijit. This is Deep. Let me take that, sorry. So absolutely, I think we have noticed there has been definitely a distinct uptick. I think this uptick is probably in the last 4 to 6 weeks. So we started noticing pure tourist kind of travel even a bit in September, but definitely thereafter. The second October weekend, as we know in India is a long weekend. I think that was a very positive sign, then the just past weekend for Dussehra et cetera is a pretty positive sign where there was a lot of travel. So like Rajesh called out, a lot of road trips, lot of weekend getaways, et cetera, but also now flights to pure tourist destinations picking up quite a bit. So also off these 50% departures, there are quite a few to tourist destinations or the 40% load factor. So Goa has become increasingly popular. People are now even looking to go beyond and to other places. So I think it's fair to say that October has definitely been more reassuring. And there is a week on week kind of increase. So we are hopeful this will continue. This is peak season, right through from October, November, December. There's no doubt that there is pent-up demand in getaway. But people are still grappling with how can we travel safely kind of thing. So I think as more awareness grows around travel, hopefully better testing protocols, I think that can really help. If we have mandatory testing protocols, it can be of huge advantage. But even until then, I think the fact that it's been quite well proven that people are not really picking up the infection or there's no transmission while they are traveling. So that is really helping people I think, give them the confidence that they can travel forth. And then, in the choice of accommodation, while people are, like you called out, is this a skew towards premium properties? Absolutely. A lot of them tend to have independent villas and cottages where people are staying, also home-stays. So that is where we are seeing the skew going right now. So the premium chains are definitely gaining. Some of them has been quite proactive, to put together programs. And we are obviously helping them, in terms of getting the word out, that there are interesting deals, good deals, and most importantly, safe way to travel. That's the key message. Vijit Jain: Right, thank you so much. Deep Kalra: Thanks, Vijit. Operator: Presenters, no questions so far. You may continue. Jonathan Huang: There are no more questions. Thank you, everyone, for joining our conference call today. If you have any further questions for us, please feel free to reach out and you may disconnect at this time. Thank you. Operator: This concludes today's conference. Thank you all for joining. Jonathan Huang: Thank you.
MakeMyTrip Target Raised to $130 Amid Steady Growth
BofA Securities analysts increased their price target for MakeMyTrip (NASDAQ:MMYT) to $130 from $119, maintaining a Buy rating on the stock. The upward revision reflects confidence in the company's solid business momentum and its ability to capitalize on a recovering travel market.
The analysts noted slight adjustments to earnings forecasts, with 2026-27 EPS estimates raised by 1.5-1.7% due to steady operational performance. However, 2025 EPS projections were lowered by 2.2%, primarily due to non-cash translation impacts stemming from the recent depreciation of the Indian rupee against the U.S. dollar. Rolling forward the discounted cash flow model contributed to the higher price target.
MakeMyTrip is well-positioned to benefit from the ongoing recovery in travel demand, supported by its strong market presence and relatively low competition in the sector. The company is also expected to achieve robust growth alongside margin expansion. Additionally, the recently announced $150 million share buyback provides a layer of downside protection for the stock, enhancing investor confidence.
MakeMyTrip Target Raised to $130 Amid Steady Growth
BofA Securities analysts increased their price target for MakeMyTrip (NASDAQ:MMYT) to $130 from $119, maintaining a Buy rating on the stock. The upward revision reflects confidence in the company's solid business momentum and its ability to capitalize on a recovering travel market.
The analysts noted slight adjustments to earnings forecasts, with 2026-27 EPS estimates raised by 1.5-1.7% due to steady operational performance. However, 2025 EPS projections were lowered by 2.2%, primarily due to non-cash translation impacts stemming from the recent depreciation of the Indian rupee against the U.S. dollar. Rolling forward the discounted cash flow model contributed to the higher price target.
MakeMyTrip is well-positioned to benefit from the ongoing recovery in travel demand, supported by its strong market presence and relatively low competition in the sector. The company is also expected to achieve robust growth alongside margin expansion. Additionally, the recently announced $150 million share buyback provides a layer of downside protection for the stock, enhancing investor confidence.
MakeMyTrip (MMYT) Anticipates Strong Quarterly Financial Performance
MakeMyTrip (NASDAQ:MMYT) is on the brink of revealing its financial performance for the quarter ended March 2024, with expectations set high by Zacks Equity Research. The online travel giant is forecasted to unveil a notable year-over-year growth in earnings, pegged at $0.26 per share, a 23.8% jump from the previous year. This anticipated increase is not just limited to earnings; revenues are also expected to surge by 31.4% to reach $195.15 million. Such optimistic projections are underpinned by a recent upward revision of the consensus EPS estimate by 29.17% over the last 30 days, signaling a positive shift in analyst sentiment towards the company's business outlook and potential performance.
The financial community is closely watching MakeMyTrip's earnings, especially given the company's track record of exceeding consensus EPS estimates in three of the last four quarters. In its most recent quarter, MMYT didn't just meet expectations; it surpassed them by posting earnings of $0.35 per share against the anticipated $0.30, marking a surprise of +16.67%. This history of outperformance, coupled with a Zacks Rank of #1 (Strong Buy), positions the company favorably in the eyes of investors. However, the Zacks Earnings ESP (Expected Surprise Prediction) model indicates an Earnings ESP of 0%, suggesting that the Most Accurate Estimate aligns with the Zacks Consensus Estimate, which introduces a layer of uncertainty regarding an earnings beat this time around.
Amidst these financial projections, MakeMyTrip's stock performance adds another layer of intrigue. Currently trading at $72.68, the stock has experienced a notable uptick of $0.87 or 1.21% in a recent session, oscillating between a low of $69.81 and a high of $72.98. This performance is part of a broader trend that has seen MMYT's shares climb from a yearly low of $25.08 to a high of $77.3, reflecting a robust investor confidence and market valuation of approximately $7.65 billion. Such market dynamics underscore the company's resilience and growth trajectory, even as it navigates the challenges posed by macroeconomic uncertainties, including inflation and high interest rates, which have been particularly taxing for the Zacks Internet - Delivery Services industry.
Despite these macroeconomic headwinds, MakeMyTrip, alongside its industry peers, is strategically poised for growth, leveraging the increasing internet penetration in emerging markets, a burgeoning middle class, and the widespread adoption of smartphones. The company's focus on cost-control measures and strengthening its hotel business, especially in light of improving travel conditions post-pandemic, are pivotal strategies expected to drive its future success. However, the downward revision of the Zacks Consensus Estimate for MakeMyTrip's fiscal 2024 earnings to $1.13 per share from $1.17 in the past 60 days signals potential challenges ahead. Nonetheless, MakeMyTrip's strategic initiatives aimed at adapting to consumer preferences and technological advancements may well equip it to navigate through the industry's current challenges, maintaining its growth momentum in the competitive landscape.
MakeMyTrip Reiterated With Buy Rating at Citi
Citi analysts reaffirmed a Buy rating and a $43.00 price target on MakeMyTrip (NASDAQ:MMYT). The analyst highlighted positive catalysts for MakeMyTrip, driven by resilient travel demand and strong expectations for the first quarter.
Notably, domestic airline ticketing has shown continued momentum through May 2023, and the hotel sector has experienced decent occupancy trends and sustained high average room rates, as indicated by RBI data in April 2023.
Despite MakeMyTrip's improving fundamentals and a favorable competitive environment among online travel agencies (OTAs), the stock has not participated in the broader NASDAQ/tech rally, with only a 2% year-to-date increase compared to the Nasdaq-100's 39% rise. Nonetheless, the analyst maintains a positive outlook on MakeMyTrip and sees approximately 54% upside potential in their target price.
MakeMyTrip Reiterated With Buy Rating at Citi
Citi analysts reaffirmed a Buy rating and a $43.00 price target on MakeMyTrip (NASDAQ:MMYT). The analyst highlighted positive catalysts for MakeMyTrip, driven by resilient travel demand and strong expectations for the first quarter.
Notably, domestic airline ticketing has shown continued momentum through May 2023, and the hotel sector has experienced decent occupancy trends and sustained high average room rates, as indicated by RBI data in April 2023.
Despite MakeMyTrip's improving fundamentals and a favorable competitive environment among online travel agencies (OTAs), the stock has not participated in the broader NASDAQ/tech rally, with only a 2% year-to-date increase compared to the Nasdaq-100's 39% rise. Nonetheless, the analyst maintains a positive outlook on MakeMyTrip and sees approximately 54% upside potential in their target price.
