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IRCTC Down 18% in Nearly 4 Months Despite 106% Jump in Q4 Profit; Should you Buy the Dip?


Should you Buy IRCTC Share Now? Shares of Indian Railway Catering and Tourism Corporation Ltd (IRCTC) have surged about 10 per cent in the last 5 trading sessions and are up 82 per cent in a year’s period. However, the scrip is down 18 per cent in the past three-and-a-half months against a 5 per cent decline in the Nifty over this period. The IRCTC share is trading higher than 5-day and 20-day moving averages but lower than 50-day, 100-day and 200-day moving averages.

IRCTC’s net profit more than doubled during the January-March period to Rs 214 crore, compared with Rs 104 crore in the corresponding period of last year. The catering and tourism arm of Indian Railways, reported 103 per cent growth in revenue from operations to Rs 691 crore in the fourth quarter as against Rs 339 crore year-on-year (YoY).

While IRCTC’s top-line was ahead of consensus estimate due to a strong beat on the catering front amid the resumption of cooked meal services, EBITDA margin at 40 per cent was below estimates as Rail Neer business reported an EBIT loss due to a one-off charge of Rs 271 mn.

Market experts are of the opinion that the current fiscal (FY23) could turn out to be an exceptional year for the sector with the travel and tourism sector coming back on track after being hit by the pandemic. With markets gyrating, investors could look to add the stock on correction, they said.

Analysts further opined that an expensive stock like IRCTC is especially vulnerable in the current milieu where the risk-off trade triggered by the global fight against inflation is sucking out the froth in all risky assets. However, a deep correction could offer an entry opportunity to investors as the prospects for IRCTC look exciting in the days ahead.

Brokerage Prabhudas Lilladher has maintained its Hold rating on Indian Railway Catering and Tourism Corporation (IRCTC) shares with a DCF based target price of Rs 648.

“Despite a beat on revenue front, our FY23E/FY24E EPS estimates are broadly intact as we have already accounted for positives arising from rail neer expansion and catering price hike. Recommendation of reversal in 2S sitting class to unreserved category is also baked into our assumptions given the announcement was made in March,” the note stated.

Revenue from operations zoomed 104 per cent to Rs 691 crore in the March quarter as against Rs 339 crore in the corresponding quarter of last fiscal.

Indian Railway Catering and Tourism Corporation said that the business activities of the company are gradually coming on track in line with the lifting of restrictions as were imposed by the State and Central Governments. IRCTC’s EBITDA stood at Rs 303.14 crore in March 2022 up 84.22 per cent from Rs 164.55 crore in March 2021. Its EPS fell to Rs 2.67 in March 2022 from Rs 6.49 in March 2021.

IDBI Capital said in its note: “Indian Railway Catering and Tourism Corporation (IRCTC) continued to log robust revenue growth led by easing of covid curbs. Profitability observed some drag due to increase in catering revenue and loss in rail neer. In the longer term, the company will benefit from increased license income in catering as it returns to pre covid levels.”

In addition, with increased acceptance of online ticket booking, we expect internet ticketing to remain robust. Further, rail neer & tourism are also expected to improve led by easing of covid restriction and increase in travelling. The company’s focus on e-catering initiatives and increasing revenues from advertisement & license fees bodes well for long profitability of the company. Hence, we maintain our BUY rating with a target price of Rs 804/share (PE of 61x on FY24E EPS), the note further mentioned.

The views and investment tips by experts in this report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.

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