1 week ago
Shares of Rategain Travel Technologies Ltd. declined by over 10% on Tuesday, November 12, after the company reported a decent quarter but lowered its FY25 guidance.
Rategain's second-quarter results were broadly in line with Street estimates in terms of revenue, showing robust margin expansion. However, the company has reduced its FY25 revenue growth outlook to 15% year-on-year, down from 20% growth in the same period a year earlier.
The guidance cut is a combination of the following cyclical and structural factors including:
1) loss of a large mid-market hotel chain (4% of revenues) in the MarTech segment due to M&A
(2) weak order bookings due to delayed decision-making by clients
(3) normalisation of travel demand in the US
(4) pricing pressures in large contracts in the DaaS segment.
Some of these factors are expected to impact the revenue growth in financial year 2026. Strength in Adara should partly offset the weakness elsewhere.
RateGain continues to expect 150-200 basis points year-on-year EBITDA margin expansion in FY25. The company has seen a 180 basis points year-on-year improvement in the first half of FY25.
However, Kotak believes that the margin expansion in the second half of FY25 would be contingent on the extent of an impact from pricing pressures in DaaS segment and some aggression on discretionary expenses.
Brokerage firm Kotak Institutional Equities has downgraded Rategain to 'Reduce' from its earlier rating of 'Add'. The brokerage has also revised its price target to ₹800 from ₹840 earlier.
The revised price target implies a further downside of 4% from Monday's closing levels.
Kotak has slashed its revenue by 6-8% and margin estimates by up to 120 basis points, leading to 7-11% lower earnings per share.
The brokerage has turned cautious on full valuations and sees limited upside from the current levels.
Key upside risks, as per the brokerage, include quality acquisition in adjacent areas at attractive valuations, a sustained revenue CAGR at 20% and significant margin expansion.
Downside risks include share loss to competition and insourcing and an inability to cross-sell offerings.
The stock has corrected nearly 18% from its record high level of ₹921.70, which the stock had hit in February this year.
Shares of Rategain Travel Tech are currently trading 9.73% lower at ₹753.50. Deapiste the decline, the stock has risen up to 6% so far in 2024.
