RateGain Travel dives 9%; FY26 outlook disappointing, says Kotak

Shares of RateGain Travel Technologies Ltd tumbled 9 per cent in Tuesday's trade on weak Q4 sales, which were though in line with estimates. The FY26 outlook on RateGain is disappointing, Kotak said as it suggested a revised fair value of Rs 540 on the stock against Rs 630 earlier.

On Tuesday, RateGain Travel fell 8.84 per cent to hit a low of Rs 478.80 on BSE. Kotak's target on the stock suggests a 13 per cent potential upside. 

RateGain, a company aiming for mid-to-high teens revenue growth, is navigating challenging market conditions marked by pricing pressures. The firm is bracing for a decline in its distribution segment primarily due to the cessation of an OTA client and renegotiation of a significant contract, which has put further pressure on revenue figures. 

"RateGain has been impacted by pricing pressures in a few engagements and loss/ramp-downs in a few large accounts. The company would need to reduce its dependence on mature products and invest in scaling up sub-scale products to offset the external impact. We believe the process would be gradual, and the company needs to navigate near-term headwinds in the interim. We see limited upside from the current levels," Kotak said.

The company's management anticipated a 6-8 per cent year-on-year revenue growth for FY2026, with double-digit growth expected in the Data as a Service (DaaS) and Marketing Technology (MarTech) segments, which constitute around 80 per cent of its revenues. However, these gains will be offset by declines in other areas, leading to overall earnings reductions and a lower EPS forecast.

To counteract these challenges, RateGain is planning $5 million in investments, mainly targeting go-to-market strategies and technological enhancements, though this will create a margin headwind of approximately 370 basis points. Consequently, the company's Ebitda margins are forecasted to range 15-17 per cent.

"We cut our revenue (4-6 per cent) and margin estimates (150-360 bps), leading to 11-18 per cent lower EPS and a revised fair value of Rs 540 (Rs 630 earlier), valuing the
company at 30 times FY2027E NOPA," Kotak said.