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JM Financial initiates coverage on Yatra Online's stock, citing a 'buy' rating and a target price of INR 220, highlighting the company's strong position in the B2E segment.

Brokerage firm JM Financial has started its coverage of Yatra Online's stock with a 'buy' rating and set a target price of INR 220 per share, signaling a potential upside of 28.2%.

Yatra's Strong Position in the B2E Segment

JM Financial believes that Yatra Online is well-positioned to capitalize on its substantial exposure to the business-to-employee (B2E) segment, which is underserved by other online travel aggregators (OTAs) in the thriving travel industry. While OTAs currently cater to only a fraction of the total travel demand, a significant portion of this demand is fulfilled by offline marketplaces that serve B2E and B2B2C customers.

Analysts at JM Financial anticipate Yatra's B2E exposure to grow at a faster rate than its online segment, thanks to the company's management's efforts to enhance its enterprise market share, which is expected to contribute to margin expansion.

Yatra's Impressive Market Position

Yatra stands as the largest enterprise travel platform in terms of the number of corporate clients. Moreover, it ranks as the third-largest player in the online travel channel and boasts a robust catalog of hotels and accommodations.

Significant Fundraise for Growth

The recent fundraising of over INR 6 billion during Yatra's India listing is viewed as a potential game-changer for the company. It allows the management to concentrate on driving growth and gaining market share through superior execution, which has not been possible since the company's inception.

Favorable Competitive Landscape

Yatra is expected to benefit from a relatively less competitive landscape in the B2C (business-to-consumer) segment. In contrast, the B2E segment presents opportunities for consolidation by organized players, potentially positioning Yatra for substantial growth.

Yatra's Journey and Market Share

Although Yatra faced challenges in the past, including intense competition and funding difficulties, it has evolved into the largest enterprise travel platform today. With a market share of 6%, calculated based on servicing over 800 enterprises out of a total of 13,000 mid-large enterprises in India, Yatra has a significant presence. Interestingly, only half of these enterprises utilize organized channels for their travel needs, while the remaining enterprises depend on small, unorganized travel agents.

Positive Outlook

JM Financial expects Yatra's adjusted profit after tax (PAT) to improve significantly, from approximately INR 10 crore in FY23 to INR 86.6 crore in FY26.

Steadfast Confidence

Despite Yatra's recent decline in its bottom line on a quarter-on-quarter (QoQ) basis, JM Financial maintains a positive outlook. In Q4 FY23, Yatra recorded a PAT of INR 9 crore, which decreased to INR 6 crore in Q1 FY24. Furthermore, Yatra experienced a net loss of INR 17.1 crore in the last reported quarter, Q2 FY24.

JM Financial's initiation of coverage on Yatra Online precedes the company's Q3 FY24 earnings announcement, scheduled for Wednesday, January 31.