From Rs 731 in December 2022, shares of Indian Railway Catering and Tourism Corporation (IRCTC) have fallen to Rs 643. That makes for a decline of 12 percent.
Following the decline in share price and a strong set of March quarter numbers, many investors are now wondering whether this is the right time to buy the stock again.
Even so, analysts seem to be slightly unsure of entering the stock just now.
To be sure, there are positives too.
According to Kkunal Parar, Vice President of Research at Choice Broking, if the stock breaks out at Rs 657, it could rally to Rs 740 in merely a week or two. And in case, the stock scales the breakout level of Rs 775, one can expect it to hit Rs 910.
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Valuation wise, Jinesh Joshi, Research Analyst at Prabhudas Lilladher, believes the stock is fairly valued at 44 times its FY24 Earnings Per Share (EPS) estimate of Rs 14.3.
Talking about the quarterly performance, standalone revenue of IRCTC jumped 40 percent Year-on-Year during January-March to Rs 965 crore led by a huge bump-up in sales from catering and tourism. Segments such as rail neer and state teertha also witnessed healthy growth in quarterly revenue.
Revenue break up of IRCTC
Net profit surged 30 percent to Rs 278.8 crore. The company reported an exceptional gain to the tune of Rs 25.9 crore for the quarter, compared with an exceptional loss of Rs 4 crore in the year-ago period.
Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) were up 17 percent YoY to Rs 324.6 crore; yet the operating margin contracted to 33.6 percent during the quarter from a year ago’s 40.3 percent.
Joshi sees two key growth drivers for the internet ticketing company. First, he pointed out, the company’s management, in its conference call with analysts, said it sees a Rs 250 crore revenue opportunity in FY24 from the Bharat Gaurav Tourism Initiative.
“This is a 10 percent EBIT (Earnings Before Interest and Tax) margin business which means the bottomline addition will be about Rs 25 crore on an annualised profit after tax of Rs 1,000 crore,” Joshi said.
Indian Railways has introduced the concept of operating tourist trains on theme based circuits under the banner of Bharat Gaurav Tourist Trains.
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Another growth lever that Joshi sees is traction in non-convenience revenue. There are multiple businesses like advertisement, I-Pay and a loyalty programme that are yet to reach full potential, he says.
Besides, analysts have highlighted rail expansion as a growth lever for railway companies like IRCTC. IRCTC is seen as a big beneficiary of the massive railway capital expenditure and the story is yet to play out, some said.
The capital outlay for railways sector has been raised to a record Rs 2.40 lakh crore in the Union Budget 2023-24. This is almost 9 times the outlay in 2013-14.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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