IIFL Securities has initiated coverage on IRCTC with target price of Rs 2174 (SoTP based) and a BUY rating. With uncertainty about the New Catering Policy and IRCTC’s scope of work, IIFL Securities projected a modest 6% catering revenue CAGR over FY20-23. Including the 3 existing private trains, IIFL Securities estimate 13% revenue CAGR for the tourism segment. Capex is set to sharply rise in FY22 and FY23, considering ticketing infra upgrade & PDW plants, but expect FCF generation to remain healthy going forward. IRCTC Share price today is Rs 1752, trading flat.

COMMERCIAL BREAK
SCROLL TO CONTINUE READING

Technical Analysis on IRCTC Share price:

Chandan Taparia, Derivatives & Technical Analyst - Motilal Oswal says that IRCTC sees major support near Rs 1700 zone which is also near to its 50 DEMA. After the decline of the last 14 days, a hold above Rs 1775 is required for a move towards Rs 1875 – Rs 1900 zones.

See Zee Business Live TV Streaming Below:

Technical Analyst Nilesh Jain, who is Assistant Vice President (AVP), Equity Research Technical and Derivatives at Centrum Broking said that IRCTC has immediate support at Rs 1700. Bounce is expected till Rs 1800 and above that it can move towards Rs 1870.

IRCTC is a play on the normalisation of activity post Covid, and they estimate 24% EPS CAGR in FY20-23ii, driven by:

1)     accelerated adoption of online ticketing
2)     conversion of unreserved coaches to 2S class
3)     increase in capacity in the PDW (packaged drinking water) segment
4)     resumption of private trains

Optionalities exist in the form of monetisation of the 60m+ customer base and operation of more private trains. The key near-term risk is the rising Covid cases and a delay in recovery; but IRCTC’s low fixed-cost model and healthy net-cash position lend comfort. Medium-term risks are change in scope of catering by the Ministry of Railways and potential adverse regulation as GoI’s stake in IRCTC comes down. IRCTC trades at 28x FY23 PER, which compares with 30x average for IIFL coverage companies with 30%+ ROE.

Internet ticketing − Multiple growth legs to the most profitable segment:

Internet ticketing is the most relevant segment from a profitability perspective for IRCTC (27% of FY20 revenue, but 71% of EBIT). The reinstatement of service fee in Sep 2019 is a major positive. Covid would also improve the trajectory of online ticketing (73% in FY20; and 85% for FY22ii). Conversion of unreserved coaches to 2S class could yield up to 35% higher capacity as per management, while we assume 20% capacity increase from the same. Net-net, we build in a 2.3x jump in service revenue over FY20-23ii. Including ad and payment gateway revenue, we estimate 22% ticketing segment revenue CAGR, with segmental EBIT margins likely to remain above 80%.