ICICI Securities's research report on RailTel Corporation of India
Railtel Corporation of India’s (Railtel) Q1FY25 net profit grew 27% YoY to INR 487mn which is within the company’s guidance of growth of 25–30%. Railtel expects telecom revenue to grow 9–10% while projects’ revenue is anticipated at INR 20bn driving total revenue growth of 25-30% in FY25E. Considering the project business’ EBIT margins are only 5–6%, achieving guided stable margin for FY25 can be challenging arithmetically. Railtel hopes for an acceleration in its order book driven by the large capex planned by Indian Railway; it plans to bid for Kavach implementation immediately.
Outlook
We raise our EPS estimates by ~3% for FY25–26E on lower depreciation cost. Our target price is revised higher to INR 315 (from INR 240), valuing the stock at a FY26E P/E multiple of 25x (earlier 20x). This implies EV/EBITDA multiple of 14x for FY26E. Maintain SELL. Aggressive bidding in railway projects could be a potential downside risk.
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