What is it that they like about the online B2B travel distribution platform?
Shares of TBO Tek Ltd. surged as much as 8% in trade Monday, June 24, after foreign brokerage firm Goldman Sachs initiated coverage on the stock with a 'Buy' rating and a target price of ₹1,970 per share.
This indicates a further upside of 24% from the stock's closing levels on Friday (June 21).
It projects a 22% CAGR for FY24 to FY27, positioning TBO Tek's growth at the higher end of their global travel coverage spectrum.
It also offers services to retail customers such as travel agencies and independent travel consultants, and corporate customers.
What is it that they like about the online B2B travel distribution platform?
Shares of TBO Tek Ltd. surged as much as 8% in trade Monday, June 24, after foreign brokerage firm Goldman Sachs initiated coverage on the stock with a 'Buy' rating and a target price of ₹1,970 per share. This indicates a further upside of 24% from the stock's closing levels on Friday (June 21). TBO Tek has been consistently profitable, and Goldman Sachs expects its free cash flow (FCF) to net profit ratio to stay above 100% for the foreseeable future.The brokerage said the company's revenue grew by a 26% compound annual growth rate (CAGR) from FY19 to FY24. It projects a 22% CAGR for FY24 to FY27, positioning TBO Tek's growth at the higher end of their global travel coverage spectrum."We see TBO's business model as having multiple positive characteristics - exposed to a large and fragmented TAM with secular growth tailwinds, a strong execution track record, an asset light balance sheet, negative working capital, strong FCF generation, and low competition/regulatory risks," it note.Goldman Sachs wrote in a note that it sees TBO Tek as a steady earnings compounder, driven by operating leverage to achieve an estimated 30% EBITDA CAGR and 33% net income CAGR during FY24-30, based on a 21% revenue CAGR.The brokerage expects investors to focus and debates to be on the outlook for TBO's industry, risks of competition from scaled global OTAs, TBO's international expansion and M&A strategy and steady state growth and multiples for TBO."We have also done new work bench-marking TBO's growth in various regions vs our covered companies in those regions, detailed competitor analysis including case studies on WebBeds and Mondee, and a deeper look into the intermediary market, among others," it said.Key risks, as per the brokerage, include headwinds from shift to online, competition, change in supplier terms, a slowdown in global travel, non-value accretive M&A, and adverse outcome from litigations.TBO is trading at 43 times its estimated price-to-earnings ratio for FY26, which suggests a PEG ratio of 1.3. "This places it in the middle range of our India internet coverage and at the lower end compared to MSCI India and our coverage of Indian IT services," the brokerage stated.TBO Tek shares recorded 55% gains on its Dalal Street debut on May 15. The company sold its shares in the range of ₹875-920 apiece.The offer included fresh equity of ₹400 crore and an offer for sale of up to 1.25 crore shares by promoters and investors.The funds raised from the fresh issue has been used for the growth and strengthening of the platform by adding new buyers and suppliers, unidentified inorganic acquisitions, and general corporate purposes.TBO Tek offers travel inventory according to the needs of its customers and supports a wide range of currencies along with forex help. The firm enables sellers to show and market their inventory and set prices for buyers.The New Delhi-based company offers services to hotels, airlines, car rentals, transfers, cruises, insurance and rail companies. It also offers services to retail customers such as travel agencies and independent travel consultants, and corporate customers.
