Should you buy IRCTC share for less than Rs 1,400?

IRCTC share, which has been a delight for investors since its listing last year, has been in consolidation mode after its recovery from the market crash caused by the coronavirus pandemic. The stock which fell to Rs 815 on March 25, after Sensex and Nifty logged their worst losses ever, has gained 73% or Rs 598 since then.

The share fell from its record high to a new low within a month, thanks to the jitters from coronavirus to Sensex and Nifty from the resultant lockdown in a majority of states during the period.

On March 23, Sensex and Nifty logged their highest losses ever after rising number of coronavirus cases in India and the world. While Sensex lost 3,934 points to 25,981 , Nifty closed 1,135 points lower at 7,610. During the session, Sensex hit an intraday low of 25,880 and Nifty fell to 7,583.

IRCTC share too felt the heat of the crash in equity market and fell to its 2020 low on March 25 after PM Narendra Modi announced a nationwide lockdown leading to a halt in services of railways and IRCTC. 

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On April 21, the share closed at Rs 1,462 on BSE signaling a strong recovery for the PSU stock within a month of crash. Since then, IRCTC share has been trading in the range of Rs 1500 to Rs 1300 apiece. At 3:00 pm today, the stock was down 0.51% to Rs 1,396 against its previous close of Rs 1403.

This might sound as a dampener for those who are looking to invest in the stock.

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But analysts are positive on the prospects of the share as it trades 29% below its record high of Rs 1,995 reached on February 25 this year.      

Dr. VK Vijayakumar, chief investment strategist at Geojit said,"IRCTC derives major share of its revenue from ticketing & catering services in which it enjoys monopoly position.  This explains the high EBITDA of around 23% for the company. At the current price of around Rs 1,385 the stock is trading at a PE of 51 based on FY20 earnings. FY21 revenue & profits are likely to take a big hit due to the lockdown and the poor traffic after the resumption of operations.

Even though the stock has recovered around 60% from the March lows, it still 30% off from the record highs of Feb 2020. The high valuation of the stock can be justified on grounds of the company's monopoly position and high earnings potential."

Vinay Rajani, Senior Technical & Derivative Analyst, Retail Research at HDFC Securities said, "The stock has been consolidating in the narrow range of Rs 1,300-1,500 for last 5 months. Stock is still trading above its 200 DMA and maintaining its primary uptrend. Short-term indicators and oscillators on the chart have turned bullish and it seems that stock is all set to rise from the current levels. It is likely to extend the recovery towards  Rs 1497 levels followed by  Rs 1595 target. However, trading long positions should be kept with the stoploss of  Rs 1330 on closing basis."