Buy Indian Railway Catering and Tourism Corporation Ltd For Target Rs.712 by Prabhudas Liladhar Capital Ltd
We cut our EPS estimates by ~4% for FY27E/FY28E as we fine tune our margin assumptions for internet ticketing and catering division. IRCTC IN reported weak operational performance with EBITDA margin of 27.3% (PLe 33.1%) due to CSR charge of INR310mn and ECL provisioning of INR160mn. Nonetheless, traction in catering division continues to remain strong with top-line growth of 26.7% while EBIT margin of Rail Neer division improved to 16.1% (multi-quarter high). Led by capacity expansion at Rail Neer (4 plants to be added), improved growth visibility in non-convenience fee income and healthy uptick in catering division we expect sales/PAT CAGR of 8%/9% over FY26-FY28E. IRCTC trades at 28x/26x our FY27E/FY28E estimates. Given decent growth prospects, debt-free BS and healthy return-ratios we retain BUY with a TP of INR712 (35x FY28E EPS; earlier 40x). We have revised our target multiple downwards as signs of margin recovery look bleak amid changing revenue composition.
Revenue up 15.1% YoY:
Revenue increased 15.1% YoY to INR14,597mn (PLe INR13,828mn; CE INR14,324mn). Catering revenue increased by 26.7% YoY to INR6,709mn (PLe INR5,757mn) with an EBIT margin of 6.2% (PLe 10.5%). Internet ticketing revenue increased 4.8% YoY to INR3,903mn (PLe INR3,903mn) with an EBIT margin of 76.3% (PLe 85.2%). Rail Neer revenue increased 4.4% YoY to INR1,002mn (PLe INR1,130mn) with an EBIT margin of 16.1% (PLe 11.6%). Revenue from Tourism increased by 10.6% YoY to INR3,036mn (PLe INR2,920mn) with an EBIT margin of 16.2% (PLe 10.9%).
EBITDA increased 3.5% YoY:
EBITDA increased 3.5% YoY to INR3,989mn (PLe INR4,580mn, CE INR4,557mn) with a margin of 27.3% (PLe of 33.1%) as against a margin of 30.4% in 4QFY25. Divergence at the EBITDA level was due to CSR charge of INR310mn and ECL provisioning of INR160mn. Reported PAT decreased 8.9% YoY to INR3,264mn with a margin of 22.4% (PLe 24.6%) as compared to a margin of 28.2% in 4QFY25. However, adjusted PAT increased 4.4% YoY to INR3,263mn (PLe of INR3,395mn, CE INR4,029mn).
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