Indian Railway Catering and Tourism Corporation (IRCTC) Q2 increased net profit from continuing operations ₹158.5 crore, up 386% year-on-year (YoY) on a low basis. The company had reported profit after tax of ₹32.6 crore in the same quarter last year. IRCTC shares were trading with a fall of 0.4 per cent ₹851 on BSE in Tuesday’s deals.
The brokerage said in a note that IRCTC’s operating performance was in line with Prabhudas Lilladher’s estimates, driven by higher operating profit of the ticketing division amid changes in volumes in the 2S category. “Valuations may be higher as a result of events such as the recent policy flip flop on the convenience fee share with IR. Consequently, we recommend holding with a TP of Rs 779 (under review earlier).”
Its revenue rose 357% from second-quarter operations ₹405 crores as compared to ₹885 crore year-on-year (YoY). The July-September period saw huge growth across all segments as compared to the previous year.
“Given the reliance on policy formulation of the Railways keeping in view the strong performance, improving fundamentals, the huge opportunity at hand and taking into account the potential risks; We feel there is no margin of safety at the current valuation of 70x TMF earnings and thus would prefer a better entry point into the stock. ₹800.
IRCTC has a strong monopoly as it is the only entity authorized to manage catering services in trains and major stationary units at railway stations. IRCTC shares got pre-split last week after the board approved a 1:5 stock split on August 12 to help increase liquidity in the capital market, widen the shareholder base and make shares affordable for small investors. .
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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