This midcap stock jumps over 9% to fresh high. Here’s what Goldman Sachs says

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Shares of the recently listed TBO Tek, which have more than doubled since its listing in May 2024, surged 9.5% on BSE to its new peak at Rs 1,743 after global brokerage firm Goldman Sachs initiated coverages on the stock with a target price of Rs 1,970.

The global brokerage firm said that it expects a 22% FY24-27E CAGR, both at the higher end of its global travel coverage, and that they see the company’s India business as indexed to the growth in ‘Affluent India’.


TBO’s business model has multiple positive characteristics according to Golman Sachs, as the company is exposed to a large and fragmented TAM with secular growth tailwinds, a strong execution track record, an asset light balance sheet, negative working capital, strong FCF generation, and low competition/regulatory risks.

“We expect investor focus and debates to be on the outlook for TBO’s industry, risks of competition from scaled global OTAs,TBO’s international expansion and M&A strategy and steady state growth/multiples for TBO," said Manish Adukia, Analyst at Goldman Sachs.


Also read: Fertilizer stocks plummet up to 9% as GST Council refers exemption recommendation to GoM

TBO has been consistently profitable, and we expect its FCF to PAT ratio to stay higher than 100% for the foreseeable future. We see TBO as a steady earnings compounder, with operating leverage driving a 30%/33% EBITDA/net income CAGR during FY24-30E (on a 21% revenue CAGR), added Adukia.

However, despite a positive performance and outlook, the brokerage firm has also stated that the headwinds from shift to online, competition, change in supplier terms, a slowdown in global travel, non-value accretive M&A and adverse outcome from litigations can be key risks for the company.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
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