Target: ₹745
CMP: ₹670.20
Indian Railway Catering and Tourism Corporation (IRCTC) revenues increased by 23.5 per cent y-o-y primarily led by 29 per cent y-o-y increase in catering and 63 per cent y-o-y growth in Tourism revenues. There is a pipeline of 200 trains for train side vending and 451 Vande Bharat trains can be added in the coming years. As a result we are building robust growth in catering and Tourism revenues resulting in CAGR growth of 18 per cent and 29 per cent over FY23-FY25.
The company has added one new rail neer plant in Kota and will commission two new plants in Q3-FY24. As a result we have built in 11 per cent revenue CAGR for rail neer over FY23-FY25.
We believe higher contribution from low margin catering and tourism will dent margins in long term. However, we expect margins to remain above pre-covid levels in near term.
We have kept our estimates unchanged and hence we are keeping our target price unchanged at ₹745 (45x FY25 EPS). However, considering recent run up in price we downgrade the stock from Buy to Hold.