Buy Indian Railway Catering and Tourism Corporation Ltd For Target Rs.706 by Prabhudas Liladhar Capital Ltd
IRCTC IN reported weak operational performance with EBITDA margin of 28.2% (PLe of 33.4%) impacted by a one-time employee cost hit of INR200mn arising from gratuity & post-retirement benefits, input cost inflation, and maintenance charge dent of INR100mn within ticketing division. However, revenue grew 18.1% YoY to INR13,695mn (PLe of INR12,714mn) driven by strong traction in catering division due to healthy growth in prepaid trains, license fees, e-catering, and election special trains. Led by capacity expansion at Rail Neer (4 plants to be added) and healthy uptick in catering division, we expect sales CAGR of 11% over FY26-FY28E. However, we expect EBITDA margin of 30.9%/30.5% for FY27E/FY28E respectively, as share of lower yielding catering business rises. IRCTC trades at 28x/25x our FY27E/FY28E estimates. Given decent growth prospects, debt-free BS and healthy return-ratios we retain BUY with a TP of INR706 (35x FY28E EPS; no change in target multiple). In order to get more insights on our valuation thoughts of the business, refer our Manthan note
Revenue up 18.1% YoY:
Revenue increased 18.1% YoY to INR13,695mn (PLe of INR12,714mn, CE INR12,866mn). Catering revenue increased by 33.9% YoY to INR7,323mn (PLe INR5,905mn) with an EBIT margin of 9.3% (PLe 11.0%). Internet ticketing revenue increased 0.6% YoY to INR3,610mn (PLe INR4,006mn) with an EBIT margin of 80.2% (PLe 83.0%). Rail Neer revenue increased 3.1% YoY to INR1,139mn (PLe INR1,149mn) with an EBIT margin of 9.8% (PLe 13.0%). Revenue from Tourism increased by 13.8% YoY to INR1,681mn (PLe INR1,654mn) with an EBIT margin of 11.5% (PLe 12.0%). Beat on the revenue front was mainly on account of higher-than-expected catering income.
EBITDA decreased 2.7% YoY:
EBITDA decreased 2.7% YoY to INR3,867mn (PLe INR4,242mn, CE INR4,108mn) with a margin of 28.2% (PLe of 33.4%) as against 34.3% in 1QFY26. EBITDA margin was lower than our estimate due to a one-time employee cost hit of INR200mn arising from gratuity & post-retirement benefits, input cost inflation and maintenance cost charge of INR100mn. Reported PAT decreased marginally by 0.2% YoY to INR3,302mn (PLe INR3,512mn) with a margin of 24.1% (PLe 27.6%) as compared to a margin of 28.5% in 1QFY26
Please refer disclaimer at https://www.plindia.com/disclaimer/
SEBI Registration No. INH000000271
