On Tuesday, Axis Capital (NYSE:AXS) Limited began its coverage of TBO Tek Ltd (TBOTEK:IN) by assigning an 'Add' rating and setting a price target of ₹1,920. The firm's initiation of coverage is based on a valuation pegged to 50 times the estimated earnings per share (EPS) for September 2026. The recommendation comes as TBO Tek has experienced a significant increase in its stock price, soaring over 80% since its initial public offering (IPO).
TBO Tek has been recognized for establishing early leadership within the global B2B travel industry, which has been further propelled by its international growth. The company's international Gross Transaction Value (GTV) has seen a notable 3.4-fold increase from FY20 to FY24. Axis Capital's endorsement of TBO Tek's stock is underpinned by the company's successful efforts to unify a previously scattered buyer and supplier landscape in its sector.
The travel industry has seen a return to pre-pandemic revenue levels, and TBO Tek is anticipated to continue its upward trajectory. Axis Capital forecasts a 33% compound annual growth rate (CAGR) in TBO Tek's profit after tax (PAT) from FY24 to FY27E. This projection builds on an already impressive 50% PAT CAGR from FY19 to FY24. The anticipated growth is expected to be driven by an increase in gross bookings, a shift towards a more lucrative business mix featuring a higher proportion of hotel bookings and international business, and operational efficiencies that are likely to result in a 700 basis point expansion in the EBITDA margin.
However, the analysis also points out potential risks for TBO Tek, including its high dependence on a limited number of suppliers and the threat of increased competition from B2C-oriented players in the travel industry. These factors could pose challenges to the company's future performance and market position. Despite these risks, Axis Capital's initiation of coverage on TBO Tek with a positive outlook reflects a belief in the company's capacity to navigate the competitive landscape and continue its growth trajectory.
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