Prabhudas Lilladher's research report on Indian Railway Catering and Tourism Corporation
While IRCTC’s top-line was ahead of our/consensus estimate by 18%/16% due to strong beat on catering front amid incremental business coming in from TSV vending, EBITDA margin at 38% was below our estimate. Given the beat on revenue front, we increase our top-line estimates by 5.8%/6.3% for FY23E/FY24E as we re-align our assumptions for catering business, EPS upgrade is only to the tune of ~1-2% odd given inferior margin profile of the segment. We believe ticketing volumes will be keenly eyed in near term as reversal in 2S class is applicable from July. We expect ticketing volumes of 371mn/391mn in FY23E/FY24E as benefit of incremental business coming in during COVID time stands withdrawn. IRCTC trades at 58x/53x our FY23E/FY24E EPS estimates and we believe current valuations capture strong growth prospects (25% EPS CAGR over FY22-FY24E) leaving marginal room for earnings surprise. Further, earnings CAGR over 5 years post FY23 (which captures benefits of catering & rail neer expansion) stands at 6% due to absence of meaningful growth levers rendering valuations pricey.
Consequently, we maintain our HOLD rating on the stock with a DCF based TP of Rs635. At our TP, stock is implicitly valued at 50x FY24EPS of Rs12.7.
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