PL Stock Report: Indian Railway Catering and Tourism Corporation (IRCTC IN) - Q1FY24 Result Update - Catering business on a strong footing - HOLD

Indian Railway Catering and Tourism Corporation (IRCTC IN) - Jinesh Joshi - Research Analyst, Prabhudas Lilladher Pvt Ltd

Rating: HOLD | CMP: Rs646 | TP: Rs700

Q1FY24 Result Update - Catering business on a strong footing

Quick Pointers:

♦ In 1QFY24, ~104mn tickets were booked yielding convenience fee revenue of ~Rs1,980mn.

Though we increase our FY24E/FY25E revenue estimates by 4%/5% respectively as we tweak our projections for catering segment amid strong beat of 20% in 1QFY24, our EPS estimates broadly remain intact given it is a relatively low margin business. Indian Railway Catering & Tourism Corporation’s (IRCTC IN) top-line of Rs10,018mn was better than our estimates with an EBITDA margin of 34.2% (PLe 36.1%), but PAT was impacted by a one-off charge of Rs519mn. We expect sales/PAT CAGR of 14%/13% over FY23-FY25E given 1) traction in non-convenience revenue 2) rail neer expansion (4 plants to be operationalized soon) and 3) healthy growth in catering segment led by extension of services to more trains (200 contracts already in pipeline). IRCTC trades at 44x/42x our FY24E/FY25E EPS estimates and we maintain our ‘HOLD’ rating on the stock with a TP of Rs700 (45x FY25E EPS).

Revenue increases 17.5% YoY: Revenues increased 17.5% YoY to Rs10,018mn (PLe Rs9,322mn). Revenue from State Teertha and Internet ticketing was down 64.1%/3.8% YoY to Rs119mn/Rs2,901mn respectively. However, revenue from Catering/Tourism/Rail Neer was up 35.5%/59.4%/10.2% YoY to Rs4,771mn/Rs1,306mn/Rs959mn respectively. All segments were EBIT positive except for tourism which reported a loss of Rs401mn.

EBITDA/adjusted PAT jumps 6.9%/15.7% YoY respectively: EBITDA increased 6.9% YoY to Rs3,430mn (PLe Rs3,367mn) with a margin of 34.2% (PLe 36.1%) as against a margin of 37.6%/33.6% in 1QFY23/4QFY23 respectively.

Adjusted PAT was up 15.7% YoY to Rs2,841mn (PLe Rs2,620mn) with a margin of 28.4% (PLe 28.1%) as against 28.8%/28.9% in 1QFY23/4QFY23 respectively. IRCTC reported exceptional loss worth Rs519mn pertaining to provision created for fixed, variable and custody charges, for the two Tejas express trains (for the period 13th August,2021 through 31st March,2023) amid revision in haulage rates.

Con-call highlights: 1) Earmarked capex of Rs780mn towards IT modernization. 2) As of July end, IRCTC was providing catering services to 1,209 trains and 200 more contracts are in pipeline.3) Three Rail Neer plants will be commissioned this year and another one in next year. 4) Occupancy for Lucknow-Delhi and Ahmedabad-Mumbai Tejas express stood at 72.8%/89.2% respectively with collective revenue of ~Rs459mn. 5) 10 trains have been taken on lease under Bharat Gaurav scheme which is likely to aid tourism revenues. 6) Share of UPI bookings was 38% in 1QFY24. 7) Roughly ~0.47mn air tickets were booked in 1QFY24. 8) 475 Vande Bharat trains are likely to be added in near future which is likely to improve yield (AC has higher convenience fee) and aid catering business as well.

(Click on the Link for Detailed Report)