Indian Railway Catering and Tourism Corporation Ltd (IRCTC) announced a net profit of Rs 284 crore for the fiscal fourth quarter of FY24, marking a 2% increase from the corresponding period last year, primarily driven by increased ticket sales. The company’s total revenue reached Rs 1,154.8 crore, representing a 20% rise. This performance, however, did not meet the projections set by analysts, including those from Prabhudas Lilladher who anticipated a net profit of Rs 306.5 crore, indicating a 21.2% year-over-year growth but a 2.5% quarterly decrease. Similarly, net sales were forecasted to grow by 17.2% annually (or 1.1% quarterly) to Rs 1,130.8 crore.
Despite the positive revenue growth, both the top line and bottom line fell short of analyst estimates. The IRCTC board approved a final dividend of Rs 4 per share, equivalent to 200% of the paid-up share capital, totaling Rs 256 crore, for the financial year 2023-24. As of May 28, the market capitalization of IRCTC stood at Rs 87,152 crore, with shares closing at Rs 1,082.70 each on the Bombay Stock Exchange, reflecting a 1.60% drop. Over the past three months, the stock price has risen by 19%, with a 5% increase in the preceding month.
The company’s earnings before interest, tax, depreciation, and amortization (EBITDA) for the quarter amounted to Rs 402.96 crore, showing a 3.4% increase. However, the EBITDA margin contracted to 34.89% from 36.8% in the prior year, attributed to a greater contribution from lower-margin segments like catering, state teertha, and tourism, alongside a reduced share of internet ticketing revenue, which dropped to 31% from 32.8% in the previous year and 37.1% in FY23.
IRCTC remains the sole entity licensed by the Indian government to offer online railway tickets, catering services, and packaged drinking water at railway stations and trains across India. The company has broadened its service offerings to encompass various tourism and hospitality services, including luxury train tours, hotel reservations, and vacation packages. As of Q2FY24, the Indian government holds a 62.4% stake in IRCTC, followed by foreign portfolio investors and domestic institutional investors with 7.1% and 10.5% stakes, respectively, while regular shareholders possess 20%.
The Pro research team highlighted that IRCTC’s valuation appears to have outpaced its fundamental value, considering the potential for growth within the railway and tourism sectors and IRCTC’s exclusive monopoly status. They expressed anticipation for a correction to become constructive. Additionally, they projected a modest financial performance for IRCTC, with an estimated 18.5% earnings Compound Annual Growth Rate (CAGR) between FY23 and FY25e, noting that while top-line growth is expected to be robust, the diminishing proportion of high-margin internet ticketing could hinder earnings.
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