IRCTC shares down 50% from 2021 high; PL sees stock going nowhere

Shares of IRCTC were trading flat in Wednesday's trade, even as the tourism and ticketing arm of Indian Railways clocked reported a 30 per cent rise in net profit at Rs 279 crore for the March quarter. IRCTC logged a net profit of Rs 214 crore in the year-ago quarter. Revenue for IRCTC jumped 40 per cent to Rs 965 crore for the fourth quarter from Rs 691 crore in the same quarter last year.

Following quarterly numbers, Prabhudas Lilladher (PL) increased its FY24E and FY25 revenue estimates for IRCTC by 4 per cent, as it tweaked its tourism segment projections to incorporate benefits of Bharat Gaurav initiative. That said, PL's earnings per share (EPS) estimates for IRCTC remained broadly intact, given it is a relatively low margin business

PL said IRCTC's revenue was broadly in-line with its estimate of Rs 944.20 crore. Ebitda margin of 33.6 per cent was against PL's estimate of 36 per cent.

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"We expect sales/PAT CAGR of 11 per cent/13 per cent over FY23-FY25E given traction in non-convenience revenue rail neer expansion and Bharat Gaurav initiative," it said.

At Wednesday's price of Rs 645.05 on BSE, IRCTC shares are down about 50 per cent from its October 2021 high of Rs 1,278.60. Prabhudas Lilladher has a target of Rs 679 on BSE, which suggests a mere 5 per cent potential upside for the stock.

IRCTC trades at 44 times PL's FY24 estimated EPS and 41 times its FY25 EPS estimates.

"We believe current valuations are fair in absence of meaningful growth levers.  Consequently, we maintain our ‘HOLD’ rating on the stock with a target price of Rs 679 (45 times September 2024 EPS of Rs 15.10). We have changed our valuation methodology (earlier DCF) considering sufficient trading history to benchmark and our target P/E multiple is broadly in-line with past average (refer exhibit 3 for more details)," PL said.

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