Shares of Indian Railway Catering and Tourism Corporation (IRCTC) have risen nearly 5% in the last five trading sessions as a public sector undertaking under the Ministry of Railways reported a nearly 200% jump in net profit earlier this week Was. 245.5 crore for the quarter ended June 30, 2022 as compared to 82.5 crore in the same quarter last year.
Meanwhile, IRCTC’s revenue from operations grew by over 250% 852.59 crore in the quarter under review, as against expected catering revenue due to base effect and increase in serviced trains within the TSV segment. 243 crore in the year-ago quarter.
Analysts at the brokerage said, “While IRCTC’s top-line was 18%/16 per cent ahead of our/consensus estimates on account of a strong beat on the catering front amid incremental business coming from TSV Vending, EBITDA margin at 38% was less than we anticipated.” Prabhudas Lilladher.
Looking at the beat on the revenue front, the brokerage house has increased its top-line estimates for FY23E/FY24E by 5.8%/6.3% as we re-align our assumptions for the catering business, with EPS upgrade only is to the tune of ~1-2 % considering the inferior margin profile of the odd segment.
“We believe ticket volume will be looked into in the near future as the 2S class reversal is in force from July. We expect the ticketing volume of 371mn/391mn in FY23E/FY24E to be offset by the incremental business gains coming during the COVID times. IRCTC trades at 58x/53x our FY23E/FY24E EPS estimate and we believe the current valuations capture strong growth prospects, leaving little room for earnings surprises,” Prabhudas Lilladher said.
Furthermore, the earnings CAGR (which captures the benefits of catering and Rail Neer expansion) in the 5 years after FY13 is at 6%, rendering the valuation valuable due to the absence of meaningful growth levers. As a result, the brokerage house has maintained its hold rating IRCTC Shares With DCF Based Target Price 635.
The state-owned company entered the primary markets by listing in October 2019 and enjoys a strong monopoly. IRCTC shares are down more than 20% so far in 2022 (YTD).
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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