Institutional Equities Thomas Cook (India) 4th June 2018 Reuters: THOM.NS; Bloomberg: TC IN Prudently Travelling Through The Growth Path BUY Thomas Cook (India) or TCIL is an asset-light, high-FCF and RoIC business growing in mid- teens on the back of constant product innovation and diversified revenue streams. We believe Sector: Tourism TCIL is a long-term compounding story and thus initiate coverage on it. At the current stock price, the market has ignored the legacy travel and forex business which continues to grow CMP: Rs271.60 well. Secular growth in tourism backed by improving disposable income, stable economic Target Price: Rs350 growth and efficiency gains should increase revenues/EBIT by 15%/34% CAGR, respectively, over FY18-FY21E for travel, forex and vacation ownership business. Additionally, the Upside: 29% company’s reasonable acquisition track record while maintaining a rock-solid balance sheet is a free option at this price. We expect the stock to continue its upward march and have Mohit Khanna assigned Buy rating to it with target price of Rs350, representing a 29% upside. Research Analyst Secular growth in tourism: India’s inbound/outbound/forex volume growth in 2017 has increased to
[email protected] 16%/11%/17% vs. last ten-year CAGR of 7%/10%/15%, respectively. However, India’s share in the global tourism pie is still dismal at 1.2%/1.5%/1.9% for inbound/outbound/forex volume, respectively. +91-22-6273 8089 This indicates vast headroom to grow. There are multiple ways to play the tourism growth theme including hotels and airlines.