TBO Tek Q1 earnings beat estimates as Classic Vacations lifts margins

Investment View and Valuation

Motilal Oswal Financial Services maintained its Buy rating on TBO Tek following a resilient 1QFY27 performance that exceeded its estimates despite a challenging operating environment. The broker has a target price of Rs 1,850, based on 35 times FY28E EPS, versus the report CMP of Rs 1,499.

Motilal Oswal expects TBO Tek to deliver FY26-FY28 revenue, EBITDA and PAT CAGRs of 35 per cent, 46 per cent and 52 per cent, respectively. Its central thesis is that a growing contribution from the higher-take-rate Hotels and Ancillary businesses will improve the gross transaction value mix and support earnings growth.

1QFY27 Financial Performance

Reported consolidated 1QFY27 revenue rose 81 per cent year-on-year to Rs 9,258 million, ahead of Motilal Oswal's Rs 8,228 million estimate, aided by the consolidation of Classic Vacations. Organic revenue grew 16 per cent year-on-year to Rs 5,950 million, compared with the broker's estimate of Rs 5,728 million.

Gross profit growth exceeded SG&A growth, producing operating leverage and supporting the strong EBITDA and PAT performance.

Operating Indicators and Business Mix

Consolidated gross transaction value (GTV) increased 37 per cent year-on-year to Rs 111,540 million, or 30 per cent in constant-currency terms. Organic GTV rose 22 per cent year-on-year, or 15 per cent in constant-currency terms, to Rs 99,180 million.

India Airlines grew 14.7 per cent year-on-year, while consolidated Airlines grew 16.9 per cent. The stronger growth in Hotels and Ancillary GTV supports the broker's view that the business mix is shifting toward higher-take-rate categories.

Geographic Performance and Outlook

Management said diversified geographic exposure helped offset the disruption in the Middle East. APAC and Europe were the strongest contributors, growing 41 per cent and 24 per cent, respectively, in constant-currency terms. The Middle East and Africa region still grew 1 per cent despite the conflict.

North America contributed approximately 24-25 per cent of Hotels GTV, supported by Classic Vacations and resilient transatlantic travel. Management expects Europe, APAC and North America to remain the key growth engines, while recovery in the Middle East would provide incremental upside. It also expects 2QFY27 to be seasonally stronger than 1QFY27.

Classic Vacations Integration and Efficiency Initiatives

Integration of the Classic Vacations platform remains on track for completion by end-CY26 or 3QFY27. Management expects the main long-term benefit to come from revenue synergies through inventory sharing and cross-selling, rather than from cost synergies.

Management also highlighted investments in customer-service automation, AI-enabled CRM and the Voya travel assistant. Near-term benefits are expected from productivity and cost efficiencies. In constant-currency terms, organic SG&A increased only 4 per cent year-on-year, headcount costs were broadly flat and hosting and bandwidth expenses declined 13.7 per cent. Cash and liquid investments stood at Rs 20,000 million, supported by a release of working capital.

Revised Estimates

Following the quarter, Motilal Oswal raised its FY27E and FY28E estimates across revenue, EBITDA and PAT.

The broker forecasts FY27E revenue of Rs 39,105 million, EBITDA of Rs 6,241 million and PAT of Rs 3,800 million. For FY28E, it forecasts revenue of Rs 48,922 million, EBITDA of Rs 8,061 million and PAT of Rs 5,665 million.

Key Risks and Monitorables

Geopolitical disruption remains an important operating backdrop, particularly for Middle East travel demand. While management expects diversified geographic exposure and growth in Europe, APAC and North America to support performance, a recovery in the Middle East remains an incremental upside factor.