Download 16670446 Make My Trip Ltd - Initiating Coverage PDF

Title16670446 Make My Trip Ltd - Initiating Coverage
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Table of Contents
                            Page 1
	Table/Chart: Stock Price & Earnings Data
	SUMMARY
	KEY POINTS
	Graph - Stock Price Performance
	Company Description
	Disclaimer
Page 2
Page 3
	Executive Summary
	India's Online Travel Leader with Several Growth Levers Ahead
	Rise in Number of Low-cost Carriers
	Rise in Discretionary Income to Fuel Travel Growth
Page 4
	Rise in Discretionary Income to Fuel Travel Growth (CONT)
	Rapid Rise in Internet Adoption
	Margin Expansion from a Favorable Mix Shift
	Key Risks for MMYT
Page 5
	Key Risks for MMYT (CONT)
Page 6
	Company Profile
	Graph - Exhibit 1. MakeMyTrip Corporate Structure
	Employees
Page 7
	Table/Chart: Exhibit 2: MakeMyTrip Employee Breakdown
	Indian Economy
	Graph - Exhibit 3: World Population (in millions)
Page 8
	Graph - Exhibit 4: India's GDP Growth Rate
	India's Rising Middle Class
Page 9
	Graph - Exhibit 5. India's Rising Middle Class
	Wallet-share Shift from Basic Necessities to Discretionary Items
Page 10
	Graph - Exhibit 6: India Discretionary vs. Non-discretionary Spending
Page 11
	India's Travel Market
	Graph - Exhibit 7: LCCs as a % of India's Airline Mix
Page 12
	Graph - Exhibit 8: India's Domestic Airline Market Share July 2010
	India's Travel Market (CONT)
	Graph - Exhibit 9: Travel and Tourism GDP in 2020
Page 13
	India's Travel Market (CONT)
	Travel Distribution Channels in India
Page 14
	Travel Distribution Channels in India (CONT)
	GDS in the Travel Ecosystem
	Airline Industry
	Hotel Industry
	Indian Railways
	Seasonality in Indian Travel
Page 15
	Religious Tourism
	Table/Chart: Exhibit 10: Key Religious Places in India
Page 16
	MakeMyTrip Business Model
	Graph - Exhibit 11: The MakeMyTrip Travel Ecosystem
	Airlines (77% of FY10 Net Revenue)
Page 17
	Airlines (77% of FY10 Net Revenue) (CONT)
	Graph - Exhibit 12: Revenue Composition -- Domestic and Outbound Air
Page 18
	Graph - Exhibit 13: Airline Revenue/Channel Mix
	Hotels & Packages (20% of FY10 Net Revenue)
Page 19
	Graph - Exhibit 14: Hotel & Packages Revenue/Channel Mix
	Other (3% of FY10 Net Revenue)
	Graph - Exhibit 15: Other-Revenue Trends ($ million) and Revenue Breakdown for FY10
Page 20
	Travel Stores
	Graph - Exhibit 16: Travel Stores in India
	Travel Agents' Network
	Call Centers
Page 21
	Mobile
	Supplier Relationships
	Table/Chart: Exhibit 17: Top Suppliers to MMYT in FY10
	Growth Opportunities/Drivers
	Growth in LCCs
Page 22
	Growth in LCCs (CONT)
	Graph - Exhibit 18: Number of LCCs in India
	Growth in Internet Penetration
Page 23
	Graph - Exhibit 19: Internet Penetration Comparison
	Rise in Credit Card Penetration Levels
Page 24
	Graph - Exhibit 20: India's Credit and Debit Card Mix
	Rise in Credit Card Penetration Levels (CONT)
	India-based Airlines Share Growing as a % of International Traffic Mix
Page 25
	Graph - Exhibit 21: International Traffic Market Share
	Hotel Bookings Growth - A Positive for Margins
	Graph - Exhibit 22: Hotel Transaction and Bookings Growth Trends
Page 26
	Hotel Bookings Growth - A Positive for Margins (CONT)
	Graph - Exhibit 23: Revenue Mix Shift - FY08-FY12
	Brand Recognition Leads to Market Share Gains
Page 27
	Competition
	Graph - Exhibit 24: OTA Market Share in India
Page 28
	Graph - Exhibit 25: Supplier Direct Vs. OTAs
	Competition (CONT)
Page 29
	Management Team
	Table/Chart: Exhibit 26: Management Team
Page 30
	Financial and Outlook
	Graph - Exhibit 27: Financials at a Glance
	FY09 Review
	Balance Sheet & Cash Flow
Page 31
	Balance Sheet & Cash Flow (CONT)
	Recent Results/News
	IPO Details
	US Investors Thirsty for India Investment Options
	FY10 Results
	F2Q11 Outlook
	FY11 Outlook
Page 32
	FY11 Outlook (CONT)
	FY12 Outlook
Page 33
	Graph - Exhibit 28: MMYT Revenue/Margin Trends
	Valuation
	Table/Chart: Exhibit 29: MMYT Valuation (share price a/o 9/21/10)
Page 34
	Valuation (CONT)
	FX Impact
Page 35
	Investment Risks
	Areas of Consideration
Page 36
	Areas of Consideration (CONT)
	Companies mentioned
Page 37
	MMYT Comps
	Table/Chart: Comparable Values
	Table/Chart: Operating and Valuation Statistics
Page 38
	Table/Chart: DCF Valuation
Page 39
	Table/Chart: DISCOUNTED CASH FLOW ANALYSIS
Page 40
	Table/Chart: MMYT - Income Statement
Page 41
	Table/Chart: MMYT - Margin Analysis
Page 42
	Table/Chart: MMYT - Growth Analysis
Page 43
	Table/Chart: MMYT Consolidated Balance Sheet
Page 44
	Investment Thesis
	Disclosure
	Companies mentioned
	Graph - Rating and Price Target History for: Ctrip.com International Ltd. (CTRP) as of 09-22-2010
Page 45
	Graph - Rating and Price Target History for: MakeMyTrip Limited (MMYT) as of 09-22-2010
	Disclosure (CONT)
Page 46
	Table/Chart: Report Key
	Disclosure (CONT)
Page 47
	Disclosure (CONT)
                        
Document Text Contents
Page 1

Manish Hemrajani
212 667-5407
[email protected]

Paul Keung
212-667-7789
[email protected]

Oppenheimer & Co. Inc. does and seeks to do business with companies covered in its research reports. As
a result, investors should be aware that the firm may have a conflict of interest that could affect the
objectivity of this report. Investors should consider this report as only a single factor in making their
investment decision. See "Important Disclosures and Certifications" section at the end of this report for
important disclosures, including potential conflicts of interest. See "Price Target Calculation" and "Key Risks
to Price Target" sections at the end of this report, where applicable.

Stock Price Performance

Q2 Q3
20

25

30

35

40

45

1 Year Price History for MMYT

Created by BlueMatrix

Company Description

MakeMyTrip Limited, an online travel company,
founded in 2000, provides travel products and
solutions in India and the US. Its products and
services include air tickets, hotels, packages,
rail tickets, bus tickets and car rental. The
company, through its online channel,
makemytrip.com, and other
technology-enhanced distribution channels,
such as call centers, travel stores, and travel
agents' network allow travelers to research,
plan, and book a range of travel services and
products in India and internationally.

September 23, 2010 INDIA/INDIA

Stock Rating:

PERFORM
12-18 mo. Price Target NA

MMYT - NASDAQ $34.07

3-5 Yr. EPS Gr. Rate 150%

52-Wk Range $41.47-$14.00

Shares Outstanding 34.1M

Float 5.8M

Market Capitalization $1,162.9M

Avg. Daily Trading Volume NA

Dividend/Div Yield NA/NM

Fiscal Year Ends Mar

Book Value ($1.42)

2011E ROE NA

LT Debt $0.1M

Preferred NA

Common Equity ($25M)

Convertible Available No

EPS Diluted Q1 Q2 Q3 Q4 Year Mult.

2010A 0.02 0.00 0.02 0.00 0.05 NM

2011E 0.05A 0.01 0.04 0.07 0.18 NM

2012E -- -- -- -- 0.46 74.1x

MakeMyTrip Limited
Initiating at Perform on India's OTA Market Leader

SUMMARY

We are initiating coverage on MakeMyTrip (MMYT), India's largest online travel

agency (OTA), with a Perform rating. We are bullish on the growth prospects of

India's largest OTA (48% share of 2009 gross bookings) on both revenues and

margins. We forecast 52% top line growth in FY11/FY12 and expect margins to

expand 40bps from FY10 to FY12. Growth levers such as LCC growth, rise in

credit/debit card penetration levels and increasing internet penetration are positive

for the name, in our view. However, we believe at current levels the shares appear

fully valued. Since its IPO, MMYT has catapulted nearly 150% from its offer price of

$14, and we believe the upside from current levels is limited.

KEY POINTS

■ Market Leader in a Nascent OTA Space : MMYT is the market leader in the

Indian OTA space, with 48% share of 2009 gross bookings. The Indian travel

market is expected to grow at a 15% CAGR to $54B in 2012 with online travel

increasing at a 27% CAGR to $8.7B in 2012 per WTTC.

■ Several Growth Levers : We identify several growth levers ahead for the

business as MMYT grows its presence in the nascent OTA market in India: 1)

rise in number of LCCs; 2) rise in discretionary spending; 3) rapid rise in internet

adoption; and 4) margin expansion from a favorable mix shift to higher margin

hotels.

■ Investments Risks: 1) supplier relationships risk; 2) highly competitive market;

3) longer-term Air Commission pressures; 4) driving the hotel business growth

online could be challenging; 5) internet penetration may not rise at rates

expected; and 6) credit card penetration growth may slow.

■ Relative Valuation: At its current price, MMYT trades at a rich P/E multiple of

85x our CY11 $0.40 EPS estimate vs. peer average of 33x with an CY11 PEG

of 1.5x compared to its closest peer CTRP's PEG of 1.2x and peer group

median of 1.3x.

■ We are establishing a FY11 net revenue estimate of $61.6M and non-GAAP

EPS of $0.18 on transaction volume of 2.5M and gross bookings of $724.5M.

For FY12, we estimate net revenue/non-GAAP EPS of $93.8M/$0.46 on

transaction volume of 3.3M and gross bookings of $1B.

EQUITY RESEARCH

INITIATION OF COVERAGE

Oppenheimer & Co Inc. 300 Madison Avenue 4th Floor New York, NY 10017 Tel: 800-221-5588 Fax: 212-667-8229

Page 2

2

Contents
INDIA’S ONLINE TRAVEL LEADER WITH SEVERAL GROWTH LEVERS AHEAD ... 3
RISE IN NUMBER OF LOW COST CARRIERS ................................................. 3
RISE IN DISCRETIONARY INCOME TO FUEL TRAVEL GROWTH ....................... 3
RAPID RISE IN INTERNET ADOPTION ........................................................... 4
MARGIN EXPANSION FROM A FAVORABLE MIX SHIFT ................................... 4
KEY RISKS FOR MMYT ............................................................................. 4

INDIAN ECONOMY ____________________________________________ 7
INDIA’S RISING MIDDLE-CLASS .................................................................. 8
WALLET-SHARE SHIFT FROM BASIC NECESSITIES TO DISCRETIONARY ITEMS9
TRAVEL DISTRIBUTION CHANNELS IN INDIA ............................................... 13
GDS IN THE TRAVEL ECOSYSTEM ............................................................ 14
AIRLINES (77% OF NET REVENUE) .......................................................... 16
HOTELS & PACKAGES (20% OF NET REVENUE) ........................................ 18
OTHER (3% OF NET REVENUE)................................................................ 19
TRAVEL STORES ..................................................................................... 20
TRAVEL AGENTS’ NETWORK .................................................................... 20
MOBILE .................................................................................................. 21
GROWTH IN LCCS .................................................................................. 21
GROWTH IN INTERNET PENETRATION ....................................................... 22
RISE IN CREDIT CARD PENETRATION LEVELS ........................................... 23
INDIA BASED AIRLINES SHARE GROWING AS A % OF INTERNATIONAL TRAFFIC MIX
.............................................................................................................. 24
HOTEL BOOKINGS GROWTH .................................................................... 25
BRAND RECOGNITION LEADS TO MARKET SHARE GAINS ........................... 26

COMPETITION ______________________________________________ 27
FINANCIAL AND OUTLOOK _____________________________________ 30

FY09 REVIEW......................................................................................... 30
RECENT RESULTS/NEWS ......................................................................... 31
FY10 RESULTS ....................................................................................... 31
FY11 OUTLOOK ...................................................................................... 31
FY12 OUTLOOK ...................................................................................... 32
FX IMPACT ............................................................................................. 34

AREAS OF CONSIDERATION ____________________________________ 35




MakeMyTrip Limited

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Exhibit 19: Internet Penetration Comparison

74.5%

49.0%

24.0%

7.0%
5.6%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

North America Europe China India Africa



Source: Euromonitor



Rise in Credit Card Penetration Levels

Indian travelers are able to pay online for travel services and products using a variety of

payment methods, including credit cards, debit cards, cash cards and internet banking.

According to Euromonitor, the number of credit cards in India was over 24.3 million in

2009, having grown at an annualized growth rate of 19% since 2000, while the number of

debit cards in India was over 130 million, having grown at an annualized growth rate of

84% since 2000. Euromonitor expects the number of credit cards in India to reach 73.7

million by 2014 (i.e., annual growth rate of over 25%) and the number of debit cards in

India to reach 350 million by 2014 (i.e., annual growth rate of over 22%).



MakeMyTrip Limited

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Exhibit 20: India’s Credit and Debit Card Mix



Source: Reserve Bank of India and Euromonitor

There are many banks among the Top Business/Finance sites in India, including both

local and international banks (46.5% reach per comScore). Online banking has gained

significant traction over the past few years, having successfully vaulted over the trust

hurdle. We believe it is only a matter of time before credit cards achieve higher

penetration levels in India.

We believe that with increasing sophistication of the banking infrastructure in India and the

provision of more secure online payment interfaces, internet users in India are overcoming

their apprehensions about security in online transactions and thereby adding to the online

consumer base.

Recently the Reserve Bank of India has asked banks to consider introduction of a general-

purpose credit card (GCC) facility up to Rs.25000 at their rural and semi-urban branches.

The credit facility will be structured as a revolving credit, entitling the holder to withdraw up

to the limit sanctioned. If introduced, we believe this could provide further impetus to credit

card growth in India.

India-based Airlines Share Growing as a % of
International Traffic Mix

As Indian Network airlines and LCCs add overseas routes from and to India we are

starting to see a mix shift in international air traffic share, with India-based airline share

rising from 29% of international traffic in 2005 to 33% in 2009. In addition, international air

traffic growth from and to India has witnessed an average growth rate of 14% from 2005-

2009. Even in a bad macro period from 2008-2009 traffic was up 6% YoY. We believe

India-based airlines could continue to gain market share on the international traffic front as

they tend to be more popular than the international fare, largely due to superior service

levels, better knowledge of the Indian consumer and service offerings that are customized

to the Indian taste. We believe this bodes well for OTAs due to their tighter relationships

with both Indian Network airlines and LCCs.

MakeMyTrip Limited

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Distribution of Ratings/IB Services Firmwide

IB Serv/Past 12 Mos.

Rating Count Percent Count Percent

OUTPERFORM [O] 336 51.60 142 42.26

PERFORM [P] 295 45.30 79 26.78

UNDERPERFORM [U] 20 3.10 4 20.00

Although the investment recommendations within the three-tiered, relative stock rating system utilized by Oppenheimer & Co. Inc. do not

correlate to buy, hold and sell recommendations, for the purposes of complying with FINRA rules, Oppenheimer & Co. Inc. has assigned

buy ratings to securities rated Outperform, hold ratings to securities rated Perform, and sell ratings to securities rated Underperform.

Company Specific Disclosures
In the past 12 months Oppenheimer & Co. Inc. has provided investment banking services for MMYT.

Oppenheimer & Co. Inc. expects to receive or intends to seek compensation for investment banking services in the next 3

months from MMYT.

In the past 12 months Oppenheimer & Co. Inc. has managed or co-managed a public offering of securities for MMYT.

In the past 12 months Oppenheimer & Co. Inc. has received compensation for investment banking services from MMYT.

Oppenheimer & Co. Inc. makes a market in the securities of MMYT, CTRP, EXPE, and PCLN.

Additional Information Available

Please log on to http://www.opco.com or write to Oppenheimer & Co. Inc., 300 Madison Avenue, New York, NY 10017,

Attention: Equity Research Department, Business Manager.

Other Disclosures
This report is issued and approved for distribution by Oppenheimer & Co. Inc., a member of all Principal Exchanges and SIPC. This

report is provided, for informational purposes only, to institutional and retail investor clients of Oppenheimer & Co. Inc. and does not

constitute an offer or solicitation to buy or sell any securities discussed herein in any jurisdiction where such offer or solicitation would be

prohibited. The securities mentioned in this report may not be suitable for all types of investors. This report does not take into account

the investment objectives, financial situation or specific needs of any particular client of Oppenheimer & Co. Inc. Recipients should

consider this report as only a single factor in making an investment decision and should not rely solely on investment recommendations

contained herein, if any, as a substitution for the exercise of independent judgment of the merits and risks of investments. The analyst

writing the report is not a person or company with actual, implied or apparent authority to act on behalf of any issuer mentioned in the

report. Before making an investment decision with respect to any security recommended in this report, the recipient should consider

whether such recommendation is appropriate given the recipient's particular investment needs, objectives and financial circumstances.

MakeMyTrip Limited

http://www.opco.com

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47

We recommend that investors independently evaluate particular investments and strategies, and encourage investors to seek the advice

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future performance of any security mentioned in this report. The price of the securities mentioned in this report and the income they

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having potential tax implications, clients should consult with their own independent tax adviser.This report may provide addresses of, or

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Copyright © Oppenheimer & Co. Inc. 2010.

MakeMyTrip Limited

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