MMYT - MakeMyTrip: Positive Earnings And Encouraging Revenue Growth
Summary
- MakeMyTrip Limited has continued to see strong revenue growth - with total revenue approaching levels last seen in 2017.
- The company has rebounded into positive earnings territory.
- I take a bullish view on MakeMyTrip.
Investment Thesis: I take a bullish view on MakeMyTrip due to strong revenue growth and a rebound in earnings to positive territory.
In a previous article back in December, I made the argument that MakeMyTrip Limited ( MMYT ) could plausibly see a rebound to positive earnings in the next couple of quarters on the back of higher revenue growth and strong balance sheet metrics.
While MakeMyTrip has been seeing a steady recovery in revenue growth - price has largely been trading in a stationary manner over the past couple of years.
The purpose of this article is to assess whether MakeMyTrip could see upside from here in light of recent performance.
Performance
When looking at 3Q 2023 financial results, we can see that total revenue for the three months ended December 2022 has seen a strong recovery from that of the same period in December 2021. In particular, the Hotels and Packages segment saw a strong increase from that of the previous year's levels.
MakeMyTrip Q3 2023 Revenue
Additionally, when comparing recent performance to that of December 2017 and 2018 (time period selected for the purposes of comparison with pre-COVID levels) - we can see that total revenue is almost back to levels seen in December 2017 . Again, Hotels and Packages was the company's largest segment by revenue.
MakeMyTrip Q3 2019 Revenue
In this regard, the fact that revenue is approaching levels last seen in 2017 is quite encouraging.
Moreover, it is also notable that earnings per share for the most recent quarter - while modest - has rebounded into positive territory:
Additionally, we can also see that adjusted earnings per share is up quite significantly on that of the previous year (on a nine-month basis):
From a balance sheet standpoint, I had previously remarked that the company's long-term loans and borrowings remain minimal relative to total assets. This continues to be the case, with non-current loans and borrowings at just over $3 million as compared to total assets of over $1.3 billion.
Additionally, the company's quick ratio (calculated as total current assets less inventories all over total current liabilities) has continued to remain well above 1 - which is encouraging as it indicates that MakeMyTrip has more than sufficient liquid assets to service its current liabilities.
| Mar 2022 |
| Sep 2022 |
| Dec 2022 |
| Total current assets |
| 591,365 |
| 636,721 |
| 650,851 |
| Inventories |
| 11 |
| 38 |
| 16 |
| Total current liabilities |
| 191,216 |
| 233,945 |
| 234,507 |
| Quick ratio |
| 3.09 |
| 2.72 |
| 2.78 |
Source: Figures sourced from MakeMyTrip Q3 FY23 Earnings. Figures provided in USD thousands, except the quick ratio. Quick ratio calculated by author.
Looking Forward
In spite of inflationary pressures and recent concerns over a decline in global economic activity, the revenue growth that MakeMyTrip has seen in the past year is quite encouraging. Additionally, given the fact that earnings growth has returned into positive territory - I take the view that the stock could have further upside ahead from here.
With the stock having seen a high of near $40 at the beginning of 2021 during the post-COVID recovery - I see it as being plausible that the stock could potentially reach this level once again.
That said, with demand for international travel having largely normalized post-COVID, one potential risk for MakeMyTrip is an increase in demand for overseas travel - which would place the company in competition with global booking platforms. One way in which this might place pressure on the company is through a rise in taxes for overseas tour packages from 5% to 20%. This could entice demand by customers for foreign booking agents who may have the ability to be more price-competitive.
With that being said, propensity for international travel demand has continued to remain strong in spite of inflationary pressures, and I am cautiously optimistic that MakeMyTrip can continue to thrive in the current environment.
Conclusion
To conclude, MakeMyTrip Limited has seen a strong rebound in revenue growth in spite of inflationary pressures. Given a rebound to positive earnings growth, I take a bullish view on MakeMyTrip and take the view that the stock could have room to rise from here.
For further details see:
MakeMyTrip: Positive Earnings And Encouraging Revenue Growth