On Tuesday, Citi maintained its Buy rating on MakeMyTrip (NASDAQ:MMYT) and increased its price target to $85 from the previous $59. The adjustment reflects a buoyant travel outlook in India, with robust demand noted in both domestic and international air travel, as well as in the hotel sector, particularly outside the budget category.
The firm noted that despite a rise in Average Daily Rates (ADRs), the demand for leisure travel has remained strong, and a demand/supply mismatch is expected to continue in the medium term. The competitive landscape among Online Travel Agencies (OTAs) has not changed, which leads to the expectation that MakeMyTrip will maintain its Advertising & Promotional (A&P) spending at around 5% of Gross Booking (NASDAQ:BKNG) Value (GBV) in the near to medium term.
Citi has revised its estimates, now expecting MakeMyTrip's adjusted EBIT margin estimates for fiscal years 2025 and 2026 to be 1.9% and 2.3% of GBV, respectively, up from the previous 1.9% and 2.1%. These estimates imply a 46% compound annual growth rate (CAGR) in adjusted EBIT from FY24 to FY26 on a 20% growth in GBV.
The price target increase is also based on a higher multiple of 36 times Enterprise Value to Adjusted EBIT, with the valuation period rolled forward to March 2026 from the previous September 2025.
At the new target price, MakeMyTrip is expected to trade at a significant premium compared to its global OTA peers, at 125% above Booking and 10% above Airbnb, which Citi justifies by pointing to MakeMyTrip's higher growth and margin expansion potential.
InvestingPro Insights
In light of Citi's optimistic outlook on MakeMyTrip, real-time data from InvestingPro further complements the analysis. MakeMyTrip's market capitalization stands at a robust $7.54 billion, and while the company's P/E Ratio is high at 150.96, reflecting investor expectations for future earnings growth, the PEG Ratio of 0.47 suggests that this growth may come at a more reasonable price when considering the earnings growth rate. The company has also demonstrated impressive revenue growth over the last twelve months as of Q3 2024, up 36.59%, with a gross profit margin of 52.88%, indicating strong operational efficiency.
Adding to the positive sentiment, InvestingPro Tips highlight that MakeMyTrip holds more cash than debt on its balance sheet and is expected to see net income grow this year. Moreover, the company's impressive gross profit margins and the fact that liquid assets exceed short-term obligations provide further assurance of its financial health. However, it's worth noting that the stock is currently trading near its 52-week high and is in overbought territory according to the Relative Strength Index (RSI), which may suggest caution for potential investors looking for an optimal entry point.
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