IRCTC shares: PL ups target price, says this on railway stock

Domestic brokerage Prabhudas Lilladher (PL) has upped its target price on Indian Railway Catering & Tourism Corporation (IRCTC) to Rs 822 from Rs 811 earlier, while keeping its 'Reduce' rating in tact, saying scope for earnings surprise is limited given growth in high margin internet ticketing division has plateaued. 

On Monday, the IRCTC stock was trading 1.16 per cent higher at Rs 935.55 on BSE. PL's target price suggests a 12.13 per cent potential downside over this price. 

PL said IRCTC's Q1 revenue was broadly in-line with its estimates, but the operational performance was weak, with Ebitda margin of 33.5 per cent against its estimate of 35.3 per cent. PL said the growth in internet ticketing division has plateaued with e-booking penetration at 83 per cent. It expects a mid-single digit growth in volumes over FY24-FY26. 

"In addition, rising share of low yielding UPI transactions (45 per cent share in 1QFY25) will limit the scope for margin expansion. While we have re-aligned our top-line estimates amid strong performance in catering division, our EPS estimates remain broadly intact given the segment commands lower margin," it said. 

During FY24, IRCTC's catering and internet ticketing division contributed 45 per cent and 30 per cent, respectively, to IRCTC’s top-line. Catering contributed 20 per cent, while internet banking contributed 77 per cent to IRCTC's EBIT in FY24 and PL believes the scope for earnings surprise is limited. 

"We expect sales/PAT CAGR of 11 per cent/12 per cent over FY24-FY26E and retain ‘REDUCE’ with a target price of Rs 822 (earlier Rs 811) after assigning a multiple of 47.5 times (no change) over FY26E EPS," it said.