After an exponential rally of almost 1900 percent in just the first 2 years after listing in October 2019, shares of Indian Railway Catering And Tourism Corp (IRCTC) have seen a consistent correction, falling over 30 percent since October 2021.
Just in the last 1 year, the stock has underperformed benchmark indices, down over 5 percent amid overall volatility in the equity markets. In comparison, the benchmark Nifty has surged almost 9 percent in this period. For 2023 YTD, the stock has added 5 percent versus an around 7 percent rise in Nifty.
According to a MintGenie poll of 5 analysts, 1 has a ‘strong buy’ call on the stock, 2 have ‘hold’ and 2 have ‘strong sell’ recommendations.
IRCTC witnessed one of the best debuts in the Indian markets in October 2019. The stock was listed at ₹644, an over 101 percent premium from its issue price of ₹320. Post listing, the stock was in high demand on the back of strong fundamentals, robust growth outlook, sectoral prospects, financial performance, etc. In just 2 years after its debut, the stock hit its record high of ₹6,375.45, in October 2021, witnessing a massive 1892 percent return against its issue price. After hitting a record high, the company, later that same month (October 2021), announced a stock split in the ratio of 1:5. Post that, the stock has moved on a downward trend, down over 30 percent since October 2021.
Currently trading at around ₹672.55, the stock is now a little over 13 percent away from its 52-week high of ₹775, hit in November 2022. Meanwhile, it has risen 21 percent from its 52-week low of ₹557, hit in March 2023.
Earlier this month, the company posted June quarter numbers, missing expectations. It reported a decline of 5 percent in its standalone net profit at ₹232 crore as compared to ₹245 crore in the corresponding period last year. Revenue from operations rose 17 percent during the June quarter to ₹1,001 crore versus ₹852.6 crore in the year-ago period. Segment-wise, the revenue from the catering segment rose 35 percent YoY to ₹471 crore during the first quarter while revenue from the rail neer segment jumped 10 percent to ₹96 crore in the quarter. However, the internet ticketing business revenues dropped marginally by 4 percent to ₹290 crore for the April-June period.
EBITDA during the June quarter came in at ₹343 crore, up 6.9 percent as against ₹321 crore in the year-ago period while margins stood at 34.2 percent versus 37.6 percent in the year-ago period.
MintGenie collated views of brokerage firms and technical analysts to understand whether the stock is a ‘buy’ at this juncture or not. Let's take a look:
Fundamental Views
B&K Securities: Post the company's June quarter results, the brokerage house maintained its 'sell' call with a target price of ₹472, indicating a downside of almost 30 percent.
"IRCTC remains a robust business model. It is also a monopoly. Nonetheless, given its obligation to prioritise the broader public interest, the company faces challenges in fully embracing its monopoly position. This duality presents both pros and cons for the company. The controlled monopoly aspect protects the company from disruption but also doesn’t let it benefit from the same. It entails a responsibility to consider the social impact and act accordingly. We are thus circumspect to ascribe rich valuations to such a model. This is because entities other than the management have a disproportionate say in the outcome of IRCTC. The nature of exceptional items reported this quarter is a testament to this. We continue to believe that IRCTC’s pricing power is restrained. Our DCF implied target price is ₹472 (unchanged). However, there remain risks on the downside given we have assumed pricing improvements in FY25E, the failure of which will cause further downside," it explained.
IDBI Capital: The brokerage maintained its ‘buy’ call on the stock with a target price of ₹745 after the Q1 results, indicating an upside of around 11 percent.
"We expect catering and tourism revenues to increase 22.4 percent YoY and 22.8 percent YoY, respectively, in FY24E mainly led by the conversion of an additional nearly 200 trains in catering and the addition of Vande Bharat & Bharat Gaurav trains. We also believe that the softness in ticketing revenue due to the absence of 2S (non-AC chair car) revenue is expected to be offset by higher convenience revenues. Further, considering Q1FY24 numbers and the increase in catering trains, we have revised its margin estimates upwards by 126 bps and 27 bps for FY24E and FY25E. This has led to an increase in EPS (earnings per share) estimates upwards by 2.2 percent and 4.6 percent for FY24E and FY25E respectively," said IDBI Capital.
Technical Views
Gaurav Bissa, VP, InCred Equities
IRCTC has failed to bank on the strong tailwind seen in the railway space which has catapulted many of the rail stocks to significantly higher levels. However, the long-term structure of IRCTC is seeing marked improvement. The stock has bounced towards 700 after forming a double bottom pattern on the weekly charts. The stock has also bounced from an ascending channel support on the weekly charts suggesting the downside is likely going to be restricted and the stock is now ready for a strong upside in the coming months. The stock is also giving a breakout from the falling trendline pattern on the weekly charts and once it gives a weekly close above 670, it is expected to start a journey towards 900-1,000 levels.
Aditya Gaggar, Director of Progressive Shares
IRCTC Ltd has not only given a breakout from the Cup and Handle formation (daily chart) but also a Falling Wedge breakout was witnessed in the stock which was confirmed with a breakout in RSI and an uptick in the volume. As per the Cup and Handle formation, the short-term target comes at ₹725 while the long-term target as per Falling Wedge arrives at ₹1,010.
Ashwin Ramani, Derivatives Analyst, SAMCO Securities
IRCTC has formed an inverse head and shoulder pattern on the weekly chart. The stock has taken double bottom support around 557 levels and has moved up swiftly in a higher low higher high formation since then. Since the last four weeks, the stock has been holding above the 50-period exponential moving average of 646 levels. A breakout above the 686 level, which is the neckline of the right shoulder, can lead to the price moving 100 points north until its previous swing high of 786 levels. The stock can test the 557 levels on the downside if the price breaks below 615, which is the immediate support for the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie. We advise investors to check with certified experts before taking any investment decisions.
