IRCTC shares at Rs 900? Buy stock, says Macquarie

Foreign brokerage Macquarie has initiated coverage on Indian Railway Catering and Tourism Corporation Ltd (IRCTC Ltd) with a 'Buy' rating and a target price of Rs 900, citing railway modernisation and faster launch of premium trains as key catalysts for the stock. The foreign brokerage reportedly sees a potential two times return due to India's railway modernisation ambitions, ET NOW reported. Saying IRCTC enjoys a monopoly position for India railways e-ticketing and catering services, Macquarie said IRCTC generates 30 per cent free cash flow (FCF) margin and 30 per cent-plus return on equity. It also cited IRCTC's strong net cash positions. 

In an year-end BTMarkets survey earlier, Jathin Kaithavalappil Assistant Vice President at Choice Broking said the performance of the railway sector depends on consistent expenditure by the government. Selective opportunities like IRCTC and RVNL warrant monitoring due to their strategic importance and potential policy backings, even though growth will be modest in the near term, he suggested earlier.

IRCTC is the only entity authorised by Indian Railways to provide catering services to railways, online railway tickets and packaged drinking water at railway stations and trains in India. It was incorporated with the objective to upgrade, modernise and professionalise catering and hospitality services, managing hospitality services at railway stations, on trains and other locations and to promote international and domestic tourism in India through public-private participation. 

The company operates one of the most transacted websites, www.irctc.co.in, in the Asia-Pacific Region It has also diversified into other businesses, including non-railway catering and services such as e-catering, executive lounges and budget hotels, which are in line with its objective to build a ‘one stop solution’ for its customers.

IRCTC shares have fallen 25 per cent in the past six months against a 3 per cent drop in the BSE Sensex during the same period. The stock closed at Rs 763.50 on Thursday.

IRCTC reported a 4.48 per cent rise in net profit for the September quarter at Rs 307.86 crore compared with Rs 294.67 crore in the corresponding quarter last year. Revenue from operations grew 7.2 per cent to Rs 1,064 crore in Q2 compared with Rs 992.40 crore in the same period last year. Other income for the quarter rose 27 per cent YoY to Rs 59.97    crore from Rs 47.07 crore in the September quarter of last year.