Smallcap Tourism Stock can come to RS 1,800: Jefferies gives 3 reasons for upward

International Brokerage Jefferies has called the newest acquisition of TBO TEK a “classic opportunity” to expand its global reach, after the company had announced the purchase of classic holidays, a luxury travel wholesale -based wholesale trade, for around $ 125 million. The brokerage has raised its price target on the shares to RS 1,800 from RS 1,625 and repeated its buy -rating. The stock ended in RS 1,578, higher with 2.33% compared to the last closure of the NSE.

According to Jefferies, the acquisition offers clear benefits for TBO. Firstly, it gives the company a stronger access to the large outgoing luxury travel market in the US, where the current presence of TBO is only about 5% of the gross transaction value. Classic brings relationships with US Travel Consortia and a composite network of approximately 1500 luxury hotels, which are gradually being integrated into TBO Platinum, the luxury platform of the company.

Secondly, synergies between the two companies are expected to open up growth. Although Classic’s income has been Flattish in recent years, Jefferies believes that the supply technology and the booking engine of TBO will improve efficiency and broaden the offer. The acquisition is also expected to be in profit profits from the short term, helped by Classic’s longer booking windows of 140-245 days versus TBOs 60, which supports stronger working capital.

Third, despite the fact that the acquisition is priced on a relatively higher multiple of 11 times EV/EBITDA compared to the earlier deals of TBO, Jefferies regards the appreciation as justified in view of the premium positioning and profitability of Classic. Classic works with a gross Take rate of 22-23%, much higher than the 6%of TBO, although almost half are paid as a committee for advisers. Nevertheless, the EBITDA and profit contribution to the gross transaction value is stronger than that of TBO.

Jefferies has increased his profit estimates for TBO by 2-6% for FY26–28 after the acquisition and expects income and EBITDA to grow with a composite annual rate of 33-36% during this period. It added that although TBO is planning to pause further mergers and acquisitions to concentrate on integration, the broader roll-up strategy remains intact.

Despite the 16% increase in the last month, the TBO TEK shares have fallen by 10 percent years to date. (Disclaimer: recommendations, suggestions, views and opinions of the experts are their own. These do not represent the views of economic times)