Investment Analysis Report: MakeMyTrip Limited (MMYT)

Overview:

MakeMyTrip Limited (MMYT) is a technology services company operating in the internet software/services industry. With a market capitalization of $4.18 billion, MMYT has been a prominent player in the online travel booking space. In this report, we will conduct a comprehensive analysis of MMYT's financial statements to evaluate its investment potential.

Balance Sheets Analysis:

• Total Assets: MMYT's total assets have shown a consistent increase over the past three years, reaching $1.36 billion in 2022 from $1.31 billion in 2020. This growth indicates the company's ability to expand its operations and invest in new opportunities.
• Total Liabilities: The total liabilities have also increased from $448.94 million in 2020 to $514.89 million in 2022. This rise suggests that MMYT has taken on more debt to finance its growth.
• Shareholders' Equity: Despite the increase in liabilities, MMYT's shareholders' equity has remained relatively stable, indicating that the company has been able to generate sufficient returns to offset its debt obligations.
• Working Capital: MMYT's net working capital has shown a positive trend, increasing from $695.37 million in 2020 to $1.13 billion in 2022. This indicates that the company has enough current assets to cover its short-term liabilities.

Income Statements Analysis:

• Total Revenue: MMYT's total revenue has more than tripled over the past three years, growing from $163.44 million in 2020 to $593.04 million in 2022. This robust revenue growth reflects the company's strong market position and increasing customer base.
• Net Income: Despite the significant revenue growth, MMYT has reported negative net income in all three years. The company's net losses have decreased from $55.64 million in 2020 to $11.32 million in 2022, indicating a positive trend towards profitability.
• Gross Income: MMYT's gross income has also shown a steady increase, reaching $136.85 million in 2022 from $65.08 million in 2020. This growth suggests that the company has been able to improve its operational efficiency and control costs.

Cashflow Statements Analysis:

• Operating Cash Flow: MMYT's operating cash flow has been positive in all three years, indicating that the company is generating sufficient cash from its core operations to support its business activities. The operating cash flow has increased from $67.93 million in 2020 to $37.87 million in 2022, demonstrating a healthy cash generation capability.
• Free Cash Flow: MMYT's free cash flow has fluctuated over the past three years, ranging from $6.73 million in 2020 to $30.38 million in 2022. This variability may be attributed to the company's capital expenditure decisions and investment activities.

Investment Analysis:

Based on the analysis of MMYT's financial statements, the company has shown significant growth in revenue and assets over the past three years. However, the persistent net losses raise concerns about the company's profitability and long-term sustainability. MMYT's increasing debt levels also indicate a higher financial risk.

Valuation: MMYT's enterprise value has fluctuated over the years, reaching $1.61 billion in 2020, $1.35 billion in 2021, and $1.34 billion in 2022. The fluctuating enterprise value suggests that the market may be uncertain about the company's future prospects.

Financial Health: MMYT's financial health is a mixed bag, with strong asset growth but increasing liabilities. The company needs to focus on managing its debt levels and improving its profitability to enhance its financial stability.

Earnings and Revenue Growth: MMYT has demonstrated impressive revenue growth over the years, indicating a strong market presence and customer demand. However, the company's inability to turn a profit raises concerns about its operational efficiency and cost management.

Profitability: MMYT's profitability metrics show a negative trend, with consistent net losses over the past three years. The company needs to address its cost structure and revenue generation strategies to achieve sustainable profitability.

Operating Margin and Operating Cash Flow Analysis: MMYT's operating margin has improved over the years, indicating better cost control and operational efficiency. The positive operating cash flow also reflects the company's ability to generate cash from its core business activities.

Capital Expenditure Trends and Efficiency: MMYT's capital expenditure has increased over the years, reflecting the company's investment in growth opportunities and technology enhancements. However, the fluctuating free cash flow raises questions about the efficiency of these investments.

Investment Recommendations:

Based on the analysis of MMYT's financial statements and key trends, the following recommendations are provided:

• Focus on Profitability: MMYT should prioritize improving its profitability by optimizing its cost structure and revenue streams. Implementing cost-cutting measures and enhancing operational efficiency can help the company achieve sustainable profitability.

• Debt Management: MMYT needs to carefully manage its debt levels and ensure that its capital structure is sustainable in the long run. Exploring debt refinancing options and reducing interest expenses can improve the company's financial health.

• Investment in Growth: While controlling costs, MMYT should continue to invest in growth opportunities and technology enhancements to stay competitive in the online travel booking industry. Strategic investments in marketing and customer acquisition can drive revenue growth.

• Enhance Cash Flow Generation: Improving cash flow generation through efficient working capital management and capital expenditure decisions is crucial for MMYT's financial stability. The company should focus on maximizing free cash flow to support its growth initiatives.

• Monitor Market Sentiment: Keeping track of market sentiment and investor perceptions can help MMYT gauge its valuation and make informed decisions about capital allocation and strategic initiatives. Maintaining transparency and communication with stakeholders is essential for building trust and credibility.

Viewpoint: [Neutral]

In conclusion, while MMYT has shown strong revenue growth and operational improvements, the company faces challenges in achieving profitability and managing its debt levels. By addressing these key areas and focusing on sustainable growth strategies, MMYT can enhance its financial performance and create long-term value for investors.