Hold Indian Railway Catering and Tourism Corporation Ltd. For Target Rs825 By Prabhudas Lilladher Pvt. Ltd.
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Catering business continues to surprise
Quick Pointers:
~115mn tickets booked, that yielded convenience fee revenue of ~Rs2.2bn.
Indian Railway Catering & Tourism Corporation (IRCTC IN) reported better than expected top-line performance with revenues of Rs11.1bn (PLe Rs10.3bn) led by a beat in the catering division. However, bottom-line was impacted by a one-off charge of Rs145mn amid provisioning pertaining to share in Rail Neer profits with Indian Railways. Given strong performance from catering division led by introduction of Vande Bharat trains, rising FTR bookings and expansion of business outside of Railways we re-align our growth & EBIT margin assumptions resulting in an EPS upgrade of ~3-4% over FY24E-FY26E. We expect PAT CAGR of 12% over FY23-FY26E and retain HOLD on the stock with a revised TP of Rs825 (earlier Rs749) as we increase our target multiple to 47.5x (earlier 45x; escalation of ~5% odd) to account for optionality arising from catering business.
Revenue increases 21.8% YoY: Revenues increased 21.8% YoY to Rs11,183mn (PLe of Rs10,367mn) on the back of higher than expected catering revenues. Revenues from State Teertha/Catering/Rail Neer/Tourism/Internet Ticketing was up 9.7% YoY/28.8% YoY/6.0% YoY/37.0% YoY/11.4% YoY to Rs280mn (PLe Rs344mn)/Rs5,078mn (PLe Rs4,355mn)/Rs838mn (PLe Rs932mn)/Rs1,675mn (PLe Rs1,528mn)/ Rs3,353mn (PLe Rs3,207mn) respectively. All the segments were EBIT positive except for Rail Neer.
EBITDA/adjusted PAT jumps 20.9%/23.7% YoY respectively: EBITDA increased 20.9% YoY to Rs3,940mn (PLe Rs3,736mn) with a margin of 35.2% (PLe of 36.0%). Adjusted PAT stood at Rs3,145mn (PLe of Rs2,950mn) up by 23.7% YoY with a margin of 28.1% (PLe 28.5%). There was an exceptional charge of Rs145mn due to higher provisioning pertaining to share in Rail Neer profits with Ministry of Railways.
Con-call highlights: 1) Catering EBIT margin declined on sequential basis due to increase in share of pre-paid trains that have lower margin. 2) Cash balance stood at ~Rs23bn. 3) Rail Neer's capacity utilization was 75%, with current production capacity of 1.70mn bottles per day. The target for FY25E is to increase the capacity to 1.84mn bottles per day. 4) Tourism revenue growth was primarily attributed to Bharat Gaurav trains (11 under operation), which cater to rail-based mass tourism. Additionally, IRCTC has signed an MoU with the Uttarakhand government, further enhancing its tourism offerings. 5) Catering revenue surged due to introduction of Vande Bharat trains (41 under operations) and increase in contracts from 1,200 to 1,518 odd. Additionally, FTR bookings rose, and 8 non-railway catering projects commenced, with 7 in pipeline. Recent partnership with Zomato further boosted catering revenues. 6) New catering contracts with long term tenders are being rolled out.
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