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HDFC Securities Retail Research
RateGain Travel Technologies Ltd.'s MarTech segment has potential to grow at rapid pace given the low penetration within the addressable market, cross selling ability with existing offerings and strong positioning by leveraging domain knowledge and platform capabilities.
Additional, Adara acquisition makes digital marketing more intelligent and effective, by adding a layer of travel intent; thereby delivering better return on ad spend. Recent commentaries of travel companies across segments (hotels, airlines, online travel agencies, cruise lines) are positive on travel demand sustaining, despite macro uncertainties in the U.S. and Europe. Both data-as-a-service and distribution (high margin business) continue to witness good traction, with good volume growth from existing clients and continued monetisation of new logos which were added in the past couple of quarters.
RateGain is well placed in the hospitality tech industry and is poised to see high teen organic growth over FY23-25E. Company's management has guided for 55-58% revenue growth in FY24E (organic growth of 17-20%).
Strong organic growth guidance is on the back of strong order book, pipeline and high GRR. Being a software-as-a-system player, the company benefits from positive operating leverage resulting in margin expansion.
The management is growth focused yet profitability oriented. Moreover, its healthy balance sheet supports strategic investments through acquisition in certain companies/ brands, complementary technologies and product lines. Rategain writes off research and development expenses in the year of spend and hence its profit after tax is to be viewed in light of this background.
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