Motilal Oswal initiates coverage on DreamFolks; sees over 25% upside
"Over the last decade, the company has effectively disrupted the Indian market, overtaking existing players and securing a substantial market share," the report read.
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Domestic brokerage Motilal Oswal has initiated coverage on India's leading airport services aggregator and tech platform DreamFolks. It gave a 'buy' call on the stock with a target price of Rs 650 apiece, implying a 25.3 per cent upside from Tuesday's closing at Rs 518.8 apiece.
Reasons for brokerage's bullishness include:
>>Rapid growth in the Indian airline industry.
>>Competitive fares.
>> Rising leisure travel.
>> New airports.
>> Government's push under the UDAN scheme.
"Over the last decade, the company has effectively disrupted the Indian market, overtaking existing players and securing a substantial market share," the report read.
It further said this can be attributed to the company’s differentiated real-time reconciliation software compared to peers with legacy offerings, helping save time and streamline banking processes.
As per the brokerage, the increasing adoption of bank cards (with lounge access as a key benefit) is also boosting the pay-per-use revenue model of the company.
On the back of strong industry tailwinds, the brokerage expects the Indian lounge access market to register a Compound annual growth rate (CAGR) of 18 per cent over FY23-26E.
Along with growing market share at 73 per cent in FY26, and increasing revenue per pax, DreamFolks is expected to deliver strong revenue growth at around 29 per cent CAGR over FY23-26E.
Additionally, the brokerage expects strong sustained growth for the company over the medium term and forecasts a 29 per cent revenue CAGR over FY23-26E.
"We expect DreamFolks to deliver gross margin closer to the upper end of its 11-13 per cent guidance range from FY25, after bottoming out in FY24 at 12.2 per cent," the report read.
Moreover, as per Motilal Oswal, it can further improve as the share of other higher-value services increases over the medium term. This should result in a healthy FY25/FY26 EBIT margin of 8.7 per cent/8.9 per cent, and an 18 per cent profit after tax (PAT) CAGR over FY23-26E.
In a year, DreamFolks shares gave risen over 17 per cent against Nifty50's rise of over 22 per cent.
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