MakeMyTrip's 65% Profit Drop Looks Bad-But the Stock May Still Be Undervalued

Q1 FY27 hurt the headline, but it did not clearly break the business

MakeMyTrip's first quarter of FY27 looked weak at first glance. Reported profit fell to $9.1 million from $25.8 million, a drop of more than 64%. That invites a simple bearish read: demand softened, margins cracked, and the stock deserves to de-rate.

But the more important question is whether investors are mistaking translation shock and mix noise for a loss of durable earning power. On demand, the business did not fall apart: gross bookings rose 9.4%, and constant-currency gross booking value rose 19.9% year over year. MakeMyTrip also said the rupee depreciated against the dollar by more than 10% year over year, which would compress reported revenue and profit when results are converted into U.S. dollars.

The quarter looks worse in dollars than in operations

Bulls can reasonably argue that this quarter reflected external pressure more than structural damage. International outbound travel from India remained subdued, but strong seasonal demand and better domestic travel activity partially offset that weakness. At the same time, the mix shifted toward hotels and packages, bus ticketing, and other transport businesses, while air ticketing softened.

That mix matters. A weaker air segment can pull down reported profit even if the platform is still capturing meaningful travel spend. If the market keeps anchoring to the profit collapse while underweighting constant-currency growth and booking resilience, the stock may look weaker than the business actually is.

Why MMYT could be mispriced right now

The market's immediate reaction to earnings is often emotional. Once investors lock onto the biggest negative headline, they can overweight that recent shock even when it is driven mainly by currency translation and a temporary travel disruption.

The market may be over-discounting a cyclical air slump

That appears to be happening here. The operating stream did not break, but the air mix did weaken: international flight departures fell 13%. Because air was the softer part of the business, investors may be treating a cyclical hit to air-heavy economics as if it were a lasting problem across the whole platform.

Investors are also looking at a stock that has already gained 25.56% in the past month. That can create a timing trap: after a sharp move, traders often punish a messy quarter more aggressively because they are focused on short-term setup rather than the next several quarters of operating trend.

Peer pressure can blur the comparison

There is also a peer-comparison angle. Trip.com recently said it had received an administrative penalty in China. That does highlight that travel companies can face regulatory and macro pressure across Asia, but it does not mean every market participant is making a clean comparison between markets and business models.

What the next print has to show

After the earlier profit shock and currency hit, the next quarter matters because it can show whether the market is overreacting or simply front-running a worse regime. MakeMyTrip reports before markets opens on Monday, and the bar is not heroic. Consensus sits at just $0.10 EPS on $270.73 million of revenue, against a full-year model of roughly $0.98 EPS and $1.14 billion in revenue.

The re-rating path is about stability, not a miracle

A re-rating is more likely if management can show stable estimates rather than spectacular ones. In practical terms, that means:

• no material downgrade cycle
• no fresh commentary that breaks the full-year framework
• evidence that non-air categories continue to do more of the heavy lifting

That matters because last quarter already showed where better economics can come from. Hotels and packages, bus ticketing, and other transport businesses were the parts of the platform that offset air weakness.

What would weaken the undervalued case

The undervalued call gets weaker if management keeps leaning on external shocks without showing operating repair. It also gets weaker if international travel remains suppressed for longer and the non-air growth engine fails to keep pace.

For now, the setup is mixed rather than clearly broken. If Monday delivers steadier numbers and stronger non-air momentum, the stock can rerate. If not, the market may be right to keep discounting the shares.