IRCTC rallies over 12% post stock split

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Share of Indian Railway Catering & Tourism Corporation (IRCTC) was trading more than 12% gains at Rs 925.35 per share on the BSE as the stock trades ex-split today. The stock made a high of Rs 949.65 in Thursday’s early deals. Its board has recommended the proposal for sub-division of the company’s one (1) equity share of the face value of Rs 10/- each into five (5) equity shares of the face value of Rs 2 each in August 2021.

In Sep’21, Indian Railways has witnessed total passenger bookings at 7.5 crore which is up 50% compared to pre-covid levels and up 7% even excluding 2S bookings. This month is the first month to mark passenger bookings higher than pre-covid volumes. For the quarter Q2FY22, bookings are higher by 100% on a QoQ basis and are up 15% higher than pre-covid volumes.

“Assuming a conservative level of 1.5x passenger per ticket and internet penetration of 80% for the quarter, IRCTC to clock ticketing sales of about 11.2 crore in Q2 (as against 7.8 crore in Q3FY20; 64 crore in Q1FY22). With EBIT margins of 85% and segmental EBIT of Rs 220 crore for the quarter (annualized Rs 1,100 crore in FY23),” said Rahul Jain, VP at Dolat Capital.

The brokerage firm expects IRCTC’s earnings to compound at 30% CAGR (Compounded Annual Growth Rate) over FY22-FY30E as it would gain from ticketing volume jump by induction of 2S in the reserved category, catering revenue normalization, pricing increase of 60%, RailNeer – doubling of capacity, and Tourism resumption/scale-up of Tours/air booking/train operations. Besides payment gateway is driving up ticketing realization, OTAs (Online Travel Agents) driving up agent fees and e-catering volume.

Given this high growth potential and monopolistic positioning across the business segments, the stock should command high earnings multiple. Dolat Capital continues to maintain its positive view on the stock with an accumulated rating and discounted cash flow-based price target of Rs 1,040 per share.

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