Accumulate IRCTC; target of Rs 1495: Prabhudas Lilladher

Prabhudas Lilladher's research report on IRCTC

IRCTC’s performance was marred by COVID-19 during 4QFY20 (impact was evident from the month of Jan itself), with revenue/EBITDA miss of 4%/8% respectively. Since convenience fee on e-ticketing was absent in the base quarter (levied from 01st Sep 2019), optically growth appears to be higher. However, on a QoQ basis revenue/EBITDA declined 18%/24% respectively. As passenger train services are suspended until 12th August 2020 and traffic growth will be lower in the initial few months after operations resume, we expect 1HFY21 to be a complete wash out. Consequently, we expect online bookings to fall by 49% YoY to 155.1mn and have cut our sales/EBITDA estimates by 52%/66% respectively for FY21E. However, we keep our FY22E estimates broadly intact and expect sales/PAT CAGR of 17%/22%respectively over 3 years driven by 1) capacity expansion of Rail Neer 2) tariff hike in mobile/static catering by ~70%/60% respectively and 3) reintroduction of service fee on e-ticketing. Strong balance sheet (cash of Rs12.9bn as of FY20), healthy return ratios & dividend pay-out gives us additional comfort.

Outlook

The stock currently trades at P/E multiple of 27x FY22E and 23x FY23E. We expect valuations to sustain given monopolistic nature of the business and clear growth traction in three business segments (Rail neer, internet ticketing & catering). Nonetheless, given the near term challenges (travel & tourism space is worst hit by pandemic) we recommend a staggered buying approach and downgrade the stock to ACCUMULATE with a revised TP of Rs1,495 (earlier Rs1,428). We value the stock at P/E multiple of 26x (no change) but roll forward our valuation to Sep-22 EPS.

IRCTC 18072020-prabhu

For all recommendations report, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.