IRCTC shares on a roller-coaster ride! Here's what experts say

Shares of state-owned Indian Railway Catering and Tourism Corporation (IRCTC) have delivered a multibagger return to its shareholders in the last 12 months. However, the stock is under tremendous selling pressure today. It declined 18 per cent to hit an intraday low of Rs 4371.25 on the Bombay Stock Exchange (BSE).

On October 19, the PSU stock rose 9 per cent to hit an all-time high of Rs 6,393 and became the ninth public sector entity to join the club of Rs 1 lakh crore market capitalisation (m-cap). However, the stock witnessed a sudden correction of more than Rs 1000 amid profit booking and ended 8.75 per cent lower at Rs 5,363 on the BSE.
 
"The internet ticketing segment which contributes around 53 per cent of revenue is likely to increase in Q2 and upcoming quarters on the back of unlocking of economy and festival season. Easing of travel restrictions by almost all states is very positive for the company as new trains will start and this will benefit all segments especially the catering segment which contributes around 27 per cent revenue," Akhil Rathi, Vice President Advisory at Marwadi Shares and Finance Limited told BusinessToday.In.
 
"The stock is likely to be under pressure in the upcoming weeks due to a strong run-up and this will be an opportunity for investors to accumulate the stock for the long term," he added.
 
According to Dr. Ravi Singh, Vice President & Head of Research, ShareIndia, "Traders have attributed the huge volatility to speculation that it has entered into F&O ban. On this speculation, investors started squaring up their positions and booked profits in the stock. The up move in IRCTC was momentarily and the profit booking after the speculation has pushed down the stock substantially. IRCTC may fall further, having a support at Rs 4,200 and Rs 3,800 and resistance at Rs 4,800 and Rs 5,200.
 
"IRCTC is aggressively focusing on its hospitality business. It is making fresh tie-ups with hotels, tour and travel service providers and local food suppliers," Ravi Singhal, Vice Chairman at GCL securities told BusinessToday.In.

"The company is also giving special focus to its food chain business in running trains. Apart from this, IRCTC has made tie-ups with aviation companies as well. So, the market has realised that in coming times, it is no more going to remain an Indian Railways' e-ticket booking platform. It will emerge as A to Z hospitality service provider," he noted.

According to a research report by IDBI Capital, an uptick in the number of passengers and tickets booked as well as in the number of trains operating should result in robust revenue growth in Q2 FY22.

"We expect a strong sequential pick-up in revenues driven by the internet ticketing and catering business. We estimate that the share of catering business should increase to 41 per cent, while the Internet ticketing segment should continue to contribute the highest towards overall revenues (+49 per cent share)," it stated.

"Sustained traction in passenger traffic will drive revenue momentum across business units (up by 88 per cent). EBIT margin is expected to improve by 580bps led by reduced losses in Tourism/Catering segments," Dolat Capital said in a report.

According to MarketsMojo, the company has a low Debt to Equity ratio (avg) at -1.07 times and has high management efficiency with a high ROE of 24.62 per cent.

The technical trend has improved from Mildly Bullish on October 4, 2021, and the stock is technically in a Bullish range now. Multiple factors for the stock are Bullish like MACD, Bollinger Band, KST, DOW, and OBV.

However, institutional investors have decreased their stake by -3.07% over the previous quarter and collectively hold 16.29 per cent of the company. Also, the stock is trading at a premium compared to its average historical valuations and it has a Very Expensive valuation.

On August 12 this year, the IRCTC board cleared a stock split in the ratio of 1:5 to increase liquidity in the capital market, widen the shareholder base and make the shares affordable for small investors. Since then, the stock has risen 138 per cent to date.

A stock split leads to an increase in the liquidity of the stock. The stock also gets more affordable for retail investors since the company divides the existing shares into new shares.

IRCTC is the only entity authorised by the Indian Railways to provide catering services to railways, online railway tickets and packaged drinking water at railway stations and trains in India.

It has a dominant position in online rail bookings and packaged drinking water with around 73 per cent and 45 per cent market share, respectively.