IRCTC shares: Buy/Hold after Q1 results? What brokerage suggests
- IRCTC shares are down over 20% in 2022 (YTD) so far
Shares of Indian Railway Catering and Tourism Corporation (IRCTC) are up about 5% in the last five trading sessions after the a public sector undertaking under the Ministry of Railways earlier this week reported about 200% jump in net profit at ₹245.5 crore for the quarter ending 30 June, 2022 as compared to ₹82.5 crore in the same quarter last year.
Meanwhile, IRCTC's revenue from operations soared more than 250% to ₹852.59 crore in the quarter under review, due to base effect and higher than expected catering revenue amid increase in trains serviced within TSV segment, as against ₹243 crore in the year ago quarter.
"While IRCTC’s top-line was ahead of our/consensus estimate by 18%/16% due to strong beat on catering front amid incremental business coming in from TSV vending, EBITDA margin at 38% was below our estimate," said analysts at brokerage Prabhudas Lilladher.
Given the beat on revenue front, the brokerage house has increased its top-line estimates by 5.8%/6.3% for FY23E/FY24E as we re-align our assumptions for catering business, EPS upgrade is only to the tune of ~1-2% odd given inferior margin profile of the segment.
“We believe ticketing volumes will be keenly eyed in near term as reversal in 2S class is applicable from July. We expect ticketing volumes of 371mn/391mn in FY23E/FY24E as benefit of incremental business coming in during COVID time stands withdrawn. IRCTC trades at 58x/53x our FY23E/FY24E EPS estimates and we believe current valuations capture strong growth prospects leaving marginal room for earnings surprise,” Prabhudas Lilladher added.
Further, earnings CAGR over 5 years post FY23 (which captures benefits of catering & rail neer expansion) stands at 6% due to absence of meaningful growth levers rendering valuations pricey. Consequently, the brokerage house has maintained its Hold rating on IRCTC shares with a DCF based target price of ₹635.
The state-owned company entered the primary markets by listing in October 2019 and enjoys a strong monopoly. IRCTC shares are down over 20% in 2022 (YTD) so far.
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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