Thomas Cook - In A Sweet Spot To Leverage Structural Tailwinds In The Travel Sector: Systematix

Systematix Research Report

Thomas Cook India Ltd., India’s leading integrated travel and travel-related financial services company, is a strong play across the booming corporate/ leisure travel, forex and related services segments.

We attribute the company’s sharp business revival across segments over the last few quarters to demand resurgence and internal initiatives, post sharp disruption seen during the pandemic.

While the hospitality and imaging businesses have already surpassed pre-pandemic levels in FY23, we expect the forex business to do so in FY24, and the travel business to achieve the same in FY25.

Margins too have risen sharply on rightsizing of branch network and digitization of multiple processes, which should deliver structural cost savings, going forward.

With the company opting for an asset-light expansion model, we expect Thomas Cook's balance sheet strengthening to continue and return on equity to keep moving towards 20%. Post the sharp recovery in FY24, we build in revenue/Ebitda/profit after tax compound annual growth rate of 17%/21%/26% over FY24-26E, and initiate coverage with a 'Buy' rating; our target price of Rs 235 is based on 30 times FY26E earnings.

Thomas Cook is in a sweet spot to benefit from sector tailwinds, supported by strong promoter/management team, a healthy balance sheet and improving return ratios that should support premium valuations.

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