ICICI Securities has downgraded TBO Tek to 'HOLD' with a target price of ₹1,550. The revision follows a 20% rise in the stock price over the last three months and concerns regarding regional instability in the Middle East market.
ICICI Securities has updated its stance on TBO Tek, moving the stock rating from 'Add' to 'HOLD'. The brokerage set a new target price of ₹1,550 per share, reflecting a change in valuation perspective after the stock witnessed a significant 20% gain over the previous three months.
Factors Influencing the Rating Change
The decision to downgrade primarily stems from the recent price appreciation which the brokerage believes leaves limited immediate upside at current levels. Additionally, ICICI Securities highlighted persistent uncertainty in the Middle East, a region that serves as a vital market for TBO Tek’s travel distribution business. Investors typically track regional geopolitical conditions closely as these can directly impact travel demand and transaction volumes in international markets.
Q1 Financial Performance and Growth Drivers
Despite the rating change, TBO Tek’s financial results for the first quarter of fiscal year 2027 showed strong operational growth. The company reported revenue of ₹9.3 billion, an 81% increase compared to the same period last year. A key metric for the company is organic revenue, which grew by 16%.
The company also demonstrated improved operational efficiency. Adjusted EBITDA, which measures earnings before interest, taxes, depreciation, and amortization, rose by 25% during the quarter. This performance helped expand the profit margin to 17.8%, up from 15.4% in the previous quarter, as growth in gross profit outpaced the rise in selling, general, and administrative expenses.
Future Growth and Valuation Outlook
Looking toward the next two years, the brokerage projects a compound annual growth rate of 30% for revenue, 39% for EBITDA, and 47% for profit after tax between fiscal years 2026 and 2028. These projections are built on the expectation that TBO Tek will continue shifting its business mix toward higher-value products. Specifically, the contribution from its Hotels and Ancillary services segment is expected to reach 69% of the total mix by fiscal year 2028.
The new target price of ₹1,550 reflects a valuation of 21 times the company's estimated enterprise value to EBITDA for fiscal year 2028. Investors monitoring the company may want to track updates on the Middle East market conditions, as well as the progress in expanding the higher-margin hotel and ancillary business segments in the coming quarters.