We re-align our EBIT margin assumptions for catering division resulting in a marginal EPS upgrade of ~1% over FY24-FY26E. Indian Railway Catering & Tourism Corporation (IRCTC IN) reported better than expected operational performance with EBITDA margin of 36.8% (PLe 34.0%) led by a beat in catering segment. We believe catering division has earnings optionality arising from 1) tie-up with Zomato 2) managing trains/coaches booked on full tariff rate (FTR) 3) ~200 contracts that are in pipeline and 4) expected onetime gain arising from increase in license fee which has been pending as the matter is sub-judice. We expect PAT CAGR of 11% over FY23-FY26E given 1) traction in non-convenience revenue 2) rail neer expansion and 3) healthy growth in catering segment.
OutlookHowever, we believe valuations at 43x/41x for our FY25E/FY26E EPS estimates price in most of these benefits and thus we maintain our ‘HOLD’ rating on the stock with a TP of Rs709 (45x FY25E EPS; no change in target multiple).
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