Why Analysts Suggest Accumulating This Railway Stock

Shares of IRCTC have been under pressure for the past few weeks along with other railway stocks, but analysts at Dolat Capital remain positive about the company’s future.

The IRCTC Analyst: The Rahul Jain-led analyst team at Dolat Capital maintained the “accumulate” rating for the stock with a price target of ₹1,000.

The IRCTC Thesis: The analysts said that IRCTC reported a robust revenue growth of 22% YoY beating their estimates, driven by new contract additions and improved renewals in Catering, which saw a 29% YoY increase.

The Tourism segment also contributed significantly with sustained momentum and new route launches, posting a 32% YoY growth. EBIT stood at ₹380 crore, up 7.8% QoQ ahead of the brokerage’s estimates of ₹370 crore, primarily due to improvements in the Tourism segment, which reported positive margins at 10.4% compared to -5.8% previously, and State Tirtha, which saw a 486bps increase in margins to 22.4%.

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The brokerage also remarked that the management remains confident about continued additions in new contracts in Catering, capacity expansions in Rail Neer plants (1 added in Q3, another by the end of March 2024), and a significant increase in new tour routes.

The brokerage firm expects a growth of 2.9% QoQ for Q4, albeit with a marginal decline in operating margin by 34bps due to changes in the business mix. IRCTC’s unique strength lies in its exclusivity across various activities within the Indian Railway ecosystem, including Ticketing, Catering, Rail Neer, and Rail-based Tourism. The analysts expect this monopoly to endure as it would ensure better quality services at reasonable prices for consumers.

Price Action: IRCTC’s share price was down 0.57% to trade at ₹946.05 in early trade on Friday.

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