IRCTC share price target: Choice says railway stock warrants premium; here's why

Choice Institutional Equities has initiated coverage on Indian Railway Catering & Tourism Corporation Ltd (IRCTC) with a 'Buy' rating and a target of Rs 560, implying 19 per cent potential upside over Tuesday's trading price of Rs 470.60 apiece.

The domestic brokerage said IRCTC warrants a premium multiple given its high-margin, monopoly-driven business model, strong cash generation, and structural growth visibility from its diversified railway ecosystem. It valued IRCTC at 25 times average of estimated FY28E and FY29E earnings per share.

"With near-term saturation in Internet Ticketing, the company is increasingly focusing on scaling other high-growth businesses. Rising AC mix (51 per cent) and adoption of Vande Bharat trains should support higher convenience fee realisation. We expect Ebitda margin to decline to 29 per cent in FY27E due to an evolving business mix, before recovering as new initiatives scale and Catering unit economics improve," Choice said.
 
The domestic brokerage said IRCTC continued to strengthen its digital moat by leveraging its exclusive position in online railway ticketing and is evolving into a broader mobility platform. E-ticketing penetration, it said, has reached 89 per cent of reserved bookings in FY26, indicating a strong digital adoption.

"The company benefits from a large user base, providing multiple opportunities for monetisation through convenience fees, payments, advertising and cross-selling of travel services. The ongoing premiumisation of passenger travel, driven by a rising AC mix (51 per cent) and increasing adoption of Vande Bharat trains, further enhances revenue potential through higher convenience fee realisation," Choice said.

In addition, it said IRCTC’s proposed unified travel platform is expected to integrate rail, air, hotel, bus and tourism services into a single ecosystem, improving customer engagement and retention.

IRCTC’s own catering operations follows a licensing-based model while its E-catering model enables passengers to connect with authorised restaurants across railway stations, allowing IRCTC to benefit from an asset-light and scalable business model which improves margin expansion as order volumes grow.

Choice noted that Bharat Gaurav (40 per cent) is the major contributor to the Tourism segment revenue. "Importantly, this business benefits from strong policy support from the government, given the broader push towards cultural tourism, rail connectivity and domestic travel promotion. IRCTC is also steadily expanding the production capacity of Rail Neer with the objective of meeting a larger share of the packaged drinking water demand," Choice said. 
IRCTC’s current daily actual production supply stands at around 15.5 lakh bottles per day, which the company plans to increase to 20 lakh bottles/day in the long term.