International Travel House - hitting an air pocket; result update Q3FY08; maintain Buy

International Travel House (ITR IN, INR 173, maintain Buy)

International Travel House’s (ITHL) Q3FY08 results were below our expectations, primarily on the back of lower-than-anticipated commission rates in the ticketing segment. Net sales were up 6% Y-o-Y at INR 200 mn. EBITDA and net profit were down 10% and 11% Y-o-Y, at INR 55 mn and INR 21 mn, respectively, in the quarter.

We have downgraded our FY08 sales and net profit estimates by 12% and 16.5%, respectively, on the back of lower-than-anticipated commissions from the air ticketing segment. Incorporating lower commission rates from the air ticketing segment in FY09, our sales and PAT estimates have been lowered by 14.4% and 19.2%, respectively. We expect air ticketing commissions in FY09E to be around ~3.3% compared to the earlier estimates of ~3.9% of billing. ITHL expects to stabilize its commissions by focusing more on the leisure travel segment, going ahead. Given the booming tourism sector, the ITC pedigree, revenues from portal and strong focus on the car rental industry, the prospects of ITHL appear bright going ahead. At CMP of INR 173, the stock is trading at 12.5x FY08E EPS of INR 13.8 and 10x FY09E EPS of INR 17.3. We maintain our ‘BUY’ recommendation on the stock.