Thomas Cook India - Strong Growth, Margin Outlook Across All Segments: Systematix

Systematix Research Report

We hosted the Thomas Cook India Ltd. management to better understand the company’s strategy to benefit from the ongoing industry tailwinds. The key takeaways were:

1. Sterling Resorts is expected to end FY25 with 65 resorts (versus 49 now), occupancy can rise to industry standards of 68-70% in the medium-term from 63% currently led by better quality hotels, improvement in food and beverage and addition of licensed bars;

2. Financial services growth will be driven by increased travel forex, international education and remittances, focus has been moved from tier-I airports to tier-II and III airports led by favorable business economics, RBI’s propositions and consolidation of forex industry is likely to benefit players such as Thomas Cook;

3. In Travel, full recovery in long haul travel is expected to be achieved in FY25, four of the five DMS units are now profitable, addition of young customers and rising aspirations of tier-II, III consumers is expected to drive growth;

4. DEI business will remain focused on theme parks, tourist attractions and luxury resorts where the growth will be led by expansion in existing countries and entry into new regions such as Saudi and Vietnam;

5. Current ex-float cash is around Rs 4 billion while gross debt level is around Rs 2.7 billion of which Rs 1.5 billion is long term debt which has a moratorium of four years and hence company is unable to prepay that;

6. return on eqyity is expected to move towards the aspiration of 20% by FY26 from current ~12% driven by growth in business volumes, margin stability and continuous investment in front end sales rather than backend operations.

The stock is currently trading at a multiple of 29 times and 22 times FY25E and FY26E earnings. We the company at 30 times FY26 earnings with a target price of Rs 235 and a Buy rating.

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