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Lower growth in contract wins in H1, pricing pressure, loss of a key account that is expected to reduce the FY25 revenue growth by 4% to around 15% are some of the concerns affecting the stock. The company has reported traction in orders in the online marketing segment in November and expects to post strong growth in the second half of the fiscal year amid an improving order pipeline.
RateGain helps global clients in the travel and hospitality sector to acquire and retain customers and expand their wallet share. It offers solutions including rate intelligence, pricing recommendation, content management and distribution.
In the September 2024 quarter, it generated 55% revenue from the US, 31% from Europe, 13% from Asia Pacific and the rest from other regions. Top 10 clients contributed 28.6% to the revenue during the quarter.
The company reported strong financial performance for the second quarter. Revenue grew by 18.1% to Rs277.3 crore while net profit jumped up by 73.8% to Rs52.2 crore. With this, revenue in the first half of FY25 grew by 19.6% to Rs537.3 crore whereas net profit shot up by Rs77.6% to Rs97.6 crore. Rising scale of operations has led to improved employee efficiency. Its employee count increased at a slower rate of 11.3% to 830 at the end of September compared with the six-month revenue growth rate, which resulted in 6.2% increase in the revenue per employee at Rs1.3 crore. The operating margin before depreciation and amortisation (EBITDA margin) improved to 20.5% in the first half of FY25 compared with 18.7% in the comparable period of the previous year.
RateGain reported new contract wins of Rs127.6 crore, 6.4% higher than the year ago while the order pipeline was Rs 469.1 crore at the end of September. The deal traction has continued in the present quarter — in November, it won a $2.4 million worth deal in the Martech segment, which deals with social media and content management.The company lost a client in the second quarter in the Martech segment due to its merger with a bigger company that has inhouse capabilities and hence, does not need RateGain’s solutions. RateGain also reported pricing pressure in the rate intelligence and pricing segment. A clear picture will emerge in the coming quarters regarding the pricing discounts and their impact on profitability.At Wednesday’s closing price of Rs 725.5 on the BSE, the stock was traded at a price-earnings (P/E) multiple of 43.8 based on the annualised net profit in the first half of FY25 compared with the average P/E of 63.3 in 2024 so far.
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