Release Date: July 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- MakeMyTrip Ltd (MMYT, Financial) reported the highest ever quarterly gross bookings, revenue, and adjusted operating profit.
- Gross booking value for Q1 was over $2.4 billion, showing a 22% year-on-year growth in constant currency terms.
- Adjusted operating profit grew by about 30% year-on-year to $39.1 million.
- The company relaunched its flagship loyalty program, MMT Black, which has shown improved operating metrics.
- Strong growth in international outbound travel, with a 25% year-on-year increase in international segments.
Negative Points
- Domestic air market growth remains muted, with only a 4.5% year-on-year increase.
- Increased marketing and sales promotion expenses, which rose to 4.8% of gross bookings from 4.6% in the same quarter last year.
- The supply situation in the domestic air market is expected to improve only in the second half of the financial year.
- Some margin dilution in international hotels due to reliance on affiliate partners for a portion of the inventory.
- Potential downside risk in the timing of domestic air market recovery due to possible delays in aircraft deliveries.
Q & A Highlights
Q: Can you explain the tax situation this quarter? Do you have tax credits, and how should we think about the tax rate going forward?
A: This is more of an accounting treatment. We created a deferred tax asset last fiscal year, and what you see now is a reversal of that asset as we generate profit. This will continue for the next couple of years, minimizing our actual tax payouts.
Q: Are the margins on international air and hotels similar to domestic ones?
A: Margins are largely similar, especially in air ticketing. For hotels, there is some margin dilution due to affiliate partners for the long tail of hotels, but overall, margins remain comparable.
Q: Are we seeing any signs of a slowdown in travel demand?
A: The demand side remains strong. While there was a temporary dip in April due to general elections and extreme temperatures, May and June saw a recovery. We do not see any concerning signs of demand slowing down.
Q: What is the outlook for air recovery? Is it expected within six months or longer?
A: We expect meaningful improvement in the air supply situation in about six months. The delivery schedules of airlines suggest that more planes will start coming in, but a full recovery might take a bit longer.
Q: Can you explain the increase in hotel commission rates this quarter?
A: The increase is not significant. Year-on-year, there is some improvement, but quarter-on-quarter, it remains within the expected range of 17% to 18%. The changes are due to mix variations and other small variables.
Q: What is the cost structure for ancillary services, and how does it impact profitability?
A: Ancillary services include insurance, ForEx, advertising, cab services, and rail ticketing. While some services have low operating costs, others like transport services have net margins similar to other transport lines. Overall, we see good operating leverage.
Q: How should we think about customer acquisition costs given the current market conditions?
A: Customer acquisition costs vary seasonally. We have increased brand marketing spends but maintain overall costs within 5% of gross bookings. We expect to continue this trend, balancing brand campaigns with efficient customer acquisition.
Q: Can you provide more details on the corporate travel business and its growth?
A: Our corporate travel business via myBiz and Quest2Travel is growing strongly. We have over 59,700 active corporate customers on myBiz and 458 large corporates on Quest2Travel. We continue to see strong growth and increased personalization on these platforms.
Q: What is the competitive landscape like in the air and hotel segments?
A: There is no significant change in competition this quarter. We continue to gain market share across all segments, growing faster than the industry. Our performance indicates effective competition and market share gains.
Q: How should we think about margins for FY25 and beyond?
A: Margins are seasonally stronger in Q1 and Q3. We expect full-year margins to remain close to current levels, around 1.6%. Our long-term goal is to reach 1.8% to 2% margins over the next three to five years, driven by operating leverage and gradual improvements.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
