$MMYT - MakeMyTrip
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$MMYT - MakeMyTrip
Website: https://www.makemytrip.com/
Current stock price: $28.11
Current market cap: $2.9 billion
Enterprise value: $2.75 billion
# of employees: 3,960
Headquarters: Gurugram, India
US Office: New York City (across from Grand Central Station)
FY 2020 revenues (ended March 2020): $723 million
FY 2021 revenues (ends March 2021): $171-196 million (est)
FY 2022 revenues (ends March 2022): $555-663 million (est)
FY 2020 Financial Results [click here]
FY 2021 Q1 Financial Results [click here]
FY 2021 Q2 Financial Results [click here]
MakeMyTrip Investor Presentation from September 2020 [click here]
OVERVIEW:
MakeMyTrip, trading under the ticker symbol $MMYT is an online travel company (OTA) that provides/sells a variety of travel related products and solutions in India, United States, Singapore, Malaysia, Thailand, United Arab Emirates, Peru, Colombia, and Indonesia.
$MMYT was founded in 2000 by Deep Kalra and Rajesh Magow then went public on the Nasdaq in January 2013 [read more here]. Approximately 4 years ago, Naspers and Trip.com ($TCOM; China’s largest travel company) invested $330 million into $MMYT. In 2019 these two companies worked out a deal where Naspers would exchange their stake in $MMYT for a 5.6% stake in Trip.com.
This transaction gave Trip.com a 48% stake in $MMYT. For reference sake, India is the second most populated country in the world with 1.39 billion people making up 17.7% of the world’s population.
$MMYT operates through three main segments: Air Travel, Ground Travel and Lodging. Their services and products include air tickets, hotel reservations and packages, train tickets, bus tickets and car transportation. $MMYT offers other ancillary services such as processing travel visas and providing access to travel insurance. $MMYT allows travelers to research, plan, reserve and purchase a range of travel services and products through its many websites and mobile app platforms including makemytrip.com, goibibo.com, redbus.in, makemytrip.com.sg, and makemytrip.ae
$MMYT is one of the top internet destinations in India as you can see below:
$MMYT also operates other distribution channels such as call centers, travel stores and a network of travel agent franchises. As of 2020 Q2, $MMYT had 14 company owned travel stores and approximately 150 franchisee owned travel stores. $MMYT serves both leisure travel and business travel.
FINANCIALS | FUNDAMENTALS:
Like most OTA’s, 2020 was a very rough year for $MMYT with revenues expected to be down 76%. With that said, as the global pandemic passes, as vaccines are distributed and as pent up demand for travel begins to resume I believe $MMYT should be a big beneficiary which should lead to strong growth in the second half of 2021 and 2022. As you can see from the chart above, analysts (via consensus estimates) are looking for a 224% rebound in revenues to $555 million. If you look at Yahoo Finance [click here] one of the analysts that covers $MMYT is looking for $663 million of revenues in the coming year. Given that $MMYT covers everything from air travel to train travel to bus travel to lodging, I do think they are well positioned for the post-pandemic return to normal and given their presence in several emerging markets with population growth and income growth I do see a lot of upside potential for the stock over the next few years.
As you can see from the chart above, the company is still losing money however they are expected to be profitable next year or the year after. Much of this depends on how quickly the global travel industry rebounds to pre-pandemic levels. Besides the strong revenue growth expected for the next few years, the metric that really caught my attention was the 82% gross margins. I usually refer to $MMYT as the “Expedia of India” however even Expedia’s gross margins are not this good. This is one reason why I like to invest in asset-light companies that are disrupting legacy industries with their technology-first products and solutions.
Even though $MMYT is currently losing money, most estimates have them growing revenues and earnings over the next 3-5 years at around a 60% CAGR which is quite impressive and well above the industry average and broad market.
The chart below shows the increase in website and mobile traffic over the past 6 months which is usually a nice leading indicator that business is slowly rebounding.
The chart below shows you where the web and mobile traffic is coming from; obviously the bulk is coming from India:
PRODUCT:
In order to get a better appreciation for $MMYT’s products I spent 30 minutes on their website [click here] and another 30 minutes on their mobile app. They have done a wonderful job with the UI/UX making the experience very pleasant. I’ve also spoken to a couple friends that currently live in India or have traveled through India and they all had very nice things to say about $MMYT. It appears that $MMYT has a very strong brand which typically leads to very high customer loyalty.
The two images below are screenshots from my phone as I was playing around on their mobile app.
Based on 20,000+ reviews in the App Store, it appears that $MMYT customers are very happy with the product:
TECHNICALS | CHARTS:
I wanted to include the two charts below which show $MMYT as both daily (top) and weekly (bottom). As you’ll see from the daily chart, $MMYT has been trending higher since the March lows with a couple small breakouts along the way.
I think the more important chart is the weekly one (below) because it goes back earlier in 2020 and shows $MMYT right near the pre-pandemic highs of February. Getting through this resistance level would be extremely bullish from a technical point of view and could take $MMYT much higher with “clear skies above” as the saying goes.
The $30-31 range is currently resistance however if $MMYT can break through and close above those prices it would likely generate a lot of strong buying momentum from the institutional investors. Then you’d want the $30-31 range to act as support in the future on any pullbacks. Yesterday $MMYT rallied up to $31.55 but then pulled back and closed at $28.11 -- I’m not going to infer too much from this single day of trading, however the next couple days will be important to establish some direction.
My favorite charts are still from TrendSpider (below). Once again you can see that $MMYT is knocking on the door of that mid-February resistance so breaking through in the next few days (hopefully) could take this stock much higher.
SHAREHOLDERS:
Once you get past the 48% ownership stake by Trip.com, $MMYT has strong ownership by large institutional investors such as MFS, Fidelity and Baillie Gifford ($250B+ asset manager based in the UK)
THESIS:
From these Estimize estimates you can see where revenues are expected to start picking up in 2021 (FY22) compared to the previous year numbers which would be 2020 for YoY comparisons.
$MMYT reports earnings in early February and by all accounts they should be bad but investors are already expecting this which means it should already be priced in. What investors will want to hear is management say that travel is starting to show signs of recovery and that the second half of 2021 (FY22) should be strong.
RISKS: Considering the UK is now going into more lockdowns and this new mutated strain of the Covid virus is popping up in the US, I do have some concerns about this impacting the OTA’s like $MMYT. Obviously if global travel (especially in South East Asia) recovers slower than anticipated it would be negative for the stock price.
India has also been hit hard by the pandemic [click here] and so was $MMYT when it dropped 65% earlier this year. Investors are typically looking forward 12-18 months and most analysts/economists expect the travel industry to see a massive surge in demand once this pandemic is behind us. I suspect by then it will be too late to get into a stock like $MMYT since the smart investors will jump in early rather than chase the stock after the “all clear” signs come out.
I like $MMYT for multiple reasons:
Based on 2021 and 2022 estimates I believe the current valuation for $MMYT is fair which includes comparisons to US stocks, emerging market stocks and their industry peers
India has 1.4 billion people and as this pandemic passes many of these people will turn to $MMYT for their travel plans
I want more international growth stocks in my portfolio that aren’t sensitive to upcoming US related political battles including stimulus packages and threats of increased corporate taxes. Owning some international stocks is another way to diversify your portfolio. My other international holdings include:
$SE (Singapore)
$FUTU (Hong Kong)
$FVRR (Tel Aviv)
$OZON (Russia)
$TRIT (Singapore)
$NIO (China)
$EH (China)
$NIO (China)
I’m a sucker for founder-led, asset-light businesses with huge growth potential and big gross margins…$MMYT meets all of these requirements
Trip.com aka $TCOM (based in China) owns 48% of $MMYT and has a market cap of approximately $20 billion which means they could easily acquire $MMYT at some point in the future. Obviously M&A deals are impossible to anticipate and I would never own or recommend a stock on this basis alone however it’s still worth mentioning and always a possibility.
Given the limitations of Substack there’s only so much content I can fit into these newsletters. Hopefully you found some value in this writeup on $MMYT. If you have any thoughts or questions please feel free to email me at jonah@luptoncapital.com or you can find me on Twitter at @JonahLupton
In full disclosure I currently have a 2.22% position in $MMYT — my portfolio is updated daily and available to anyone at [click here].
Disclaimer: The stocks mentioned in my newsletters are not intended to be a list of buy recommendations but rather some ideas for your watchlist. Perhaps they end up in your own portfolio after you conduct your own research and due diligence. Some of the stocks mentioned in my newsletters have smaller market capitalizations and therefore can be more volatile. I always encourage everyone to do their own research and due diligence before buying any stocks mentioned in my newsletters. Please manage your portfolio and position sizing in accordance with your own risk tolerance and investment objectives.
