International Travel House is a good portfolio buy at Rs 225

International Travel House (ITH) is an associate company of ITC Ltd, with the parent holding a 61.39% equity stake in ITH. It is a complete travel management organisation, with presence in 17 cities, offering a diverse range of services including corporate travel, air ticketing, car rental, destination management services, leisure holidays, hotel travel counters and foreign exchange. The company is a leader in the corporate travel segment in the country, with its car rental division managing a fleet of 1,000 vehicles. Global Star Travel Management is a worldwide travel management company, partnering ITH on a large network alliance .Global Star has over 85 market enterprises representing over US$14 billion in sales across 74 countries, thereby extending the ITH reach to almost all the major travel destinations of the world. The ITH network consists of 28 travel offices and 15 hotel travel counters handling blue chip Indian clients like Ikea, Vodafone, Facebook, Deloitte, ABB, Infosys and Sony. ITH is recognised and approved as a travel agent and tour operator by International Air Transport Association (IATA) and the Department of Tourism, Government of India. It is affiliated with key professional bodies like the American Society of Travel Agents, International Convention Promotion Bureau, Pacific Area Travel Association, Indian Association of Tour Operators, Federation of Hotel & Restaurant Associations of India and the Travel Agents Association of India. 

India’s domestic travel market grew by 23% during the last year, with domestic airlines carrying 999 lakh passengers in 2016. The growth drivers were from the retail segment, mainly due to low airfares and additional capacity added by the airlines. The Indian aviation industry estimated at USD 16 billion is expected to become the world’s third largest market by 2020. The country continues to position itself to become a world leader in business travel. Despite an increase in volume of tickets sold during the year, ITH’s top line showed a marginal growth due to lower domestic tariffs as average ticket price was down. However, the company has been able to sustain growth over the previous year by taking various initiatives. The car rental market in India estimated at USD 9 billion has been dominated by the unorganised sector and this market is expected to grow at a CAGR of 25% during the next few years. Extensive effort by the government to promote India as a tourist destination has resulted in outbound tourism growing at a healthy pace. Relaxations in forex rules and investor friendly business policies have also added to the increase in the number of business travellers. The future outlook of the company is quite bright, with the earnings per share being seen at Rs 16 and Rs 18 for FY18 and FY19 respectively. Sales are also expected to grow by more than 10% over the next few years. The book value of ITH is a solid Rs 205 on a dividend yield of around 2%. Hence, the ITH stock currently quoting at Rs 225 is a good portfolio buy for a 25% price appreciation during the next one year.

Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.