Earnings Call: MakeMyTrip Reports Growth Amidst Industry Challenges

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Earnings Call: MakeMyTrip Reports Growth Amidst Industry Challenges

Leading online travel company MakeMyTrip Limited (NASDAQ: MMYT) has announced its financial results for the second quarter of fiscal year 2025, revealing significant year-over-year growth in both gross bookings and adjusted operating profit. Despite the impact of heavy rainfall on demand, the company reported a 24.3% increase on a constant currency basis, reaching a gross bookings value of $2.3 billion. Adjusted operating profit rose by 33% to $37.5 million. The company's expansion in supply and AI-driven improvements contributed to its performance surpassing industry growth. International air ticket and hotel revenues saw substantial increases, with the company's expanded hotel offerings now spanning 165 countries. The corporate travel segment and customer loyalty initiatives also showed promising developments.

Key Highlights:

  • Gross bookings value rose by 24.3% year-over-year to $2.3 billion on a constant currency basis.
  • Adjusted operating profit increased by 33% to $37.5 million.
  • International air ticket revenue climbed by over 39%, while international hotel revenue grew by 62% year-on-year.
  • Supply-side expansions and AI-driven enhancements helped the company to outpace industry growth.
  • MakeMyTrip launched a new loyalty program and a co-branded credit card with ICICI Bank.
  • The company maintains a strong cash position of over $700 million and plans share buybacks.

Company Outlook:

  • Early indicators in October provide a positive outlook for the holiday season.
  • Implementation of GenAI technology is expected to boost efficiency and customer experience, with significant financial impacts anticipated in upcoming quarters.

Challenges:

  • Heavy rains dampened demand during the reported quarter.
  • Concerns over a slowdown in consumption were noted, although early October indicators remain positive.
  • Geopolitical tensions could pose short-term challenges for international travel.

Positives:

  • The company's hotel offerings in India surpassed 84,000, with direct international hotel contracts in over 40 cities.
  • Gross bookings for the Hotels and Packages segment grew by 21.2% year-over-year to $517.2 million on a constant currency basis.
  • The Bus Ticketing segment saw 21.5% year-over-year growth in gross bookings.

Shortcomings:

  • No significant shortcomings were reported during the earnings call.

Q&A Highlights:

  • CEO Rajesh Magow addressed airlines' tendency to direct traffic to their own websites, highlighting consumers' preference for exploring multiple options.
  • CFO Mohit Kabra discussed the buyback program, noting $135 million remains available for repurchases, with openness to increase if needed.
  • Kabra emphasized strong customer loyalty, with 70% of transactions from repeat customers, highlighting steady margins without major seasonal fluctuations.
  • The company is focused on both organic and inorganic growth opportunities in domestic and international markets.

In conclusion, MakeMyTrip's second-quarter earnings call for FY 2025 demonstrated resilience and strategic growth despite industry challenges. With a strong financial position and customer-centric innovations, MakeMyTrip is well-positioned to capitalize on the expanding travel market in India and beyond.

InvestingPro Insights: MakeMyTrip Limited's strong second-quarter results for fiscal year 2025 are further bolstered by key financial metrics and forecasts from InvestingPro. Highlighted in InvestingPro Tips, the company's impressive gross profit margins align with the reported 53.29% gross profit margin over the past twelve months. This robust profitability underscores MakeMyTrip's ability to maintain healthy margins despite industry challenges.

According to InvestingPro Data, the company's revenue growth of 29.87% over the past twelve months corroborates the notable annual growth in gross bookings mentioned in the earnings call. This growth trend is particularly noteworthy given the company's significant market cap of $11.05 billion.

An InvestingPro Tip reveals that MakeMyTrip holds more cash than debt on its balance sheet, consistent with the company's reported strong cash position exceeding $700 million. This financial stability supports MakeMyTrip's share buyback plans and the possibility of investing in potential growth opportunities.

However, investors should note that the stock trades at a high earnings multiple with a P/E ratio of 51.39. This valuation suggests that the market has high expectations for MakeMyTrip's future performance, and the company must meet these expectations to justify its current stock price.

For those seeking a more comprehensive analysis, InvestingPro offers 15 additional tips for MakeMyTrip, providing a deeper understanding of the company's financial health and market positioning.