PL Stock Report: Indian Railway Catering and Tourism Corporation (IRCTC IN) - Q2FY24 Result Update – Optionality can emerge in catering business - HOLD
Indian Railway Catering and Tourism Corporation (IRCTC IN) - Jinesh Joshi - Research Analyst, Prabhudas Lilladher Pvt Ltd.
Rating: HOLD | CMP: Rs677 | TP: Rs709
Q2FY24 Result Update – Optionality can emerge in catering business
Quick Pointers:
♦ ~116mn tickets booked, that yielded convenience fee revenue of ~Rs2.2bn.
We re-align our EBIT margin assumptions for catering division resulting in a marginal EPS upgrade of ~1% over FY24-FY26E. Indian Railway Catering & Tourism Corporation (IRCTC IN) reported better than expected operational performance with EBITDA margin of 36.8% (PLe 34.0%) led by a beat in catering segment. We believe catering division has earnings optionality arising from 1) tie-up with Zomato 2) managing trains/coaches booked on full tariff rate (FTR) 3) ~200 contracts that are in pipeline and 4) expected onetime gain arising from increase in license fee which has been pending as the matter is sub-judice. We expect PAT CAGR of 11% over FY23-FY26E given 1) traction in non-convenience revenue 2) rail neer expansion and 3) healthy growth in catering segment. However, we believe valuations at 43x/41x for our FY25E/FY26E EPS estimates price in most of these benefits and thus we maintain our ‘HOLD’ rating on the stock with a TP of Rs709 (45x FY25E EPS; no change in target multiple).
Revenue increases 23.5% YoY: Revenues increased 23.5% YoY to Rs9,953mn (PLe Rs10,611mn). Revenue from State Teertha / Catering / Rail Neer / Tourism / Internet Ticketing was up 118.9% YoY/29.0% YoY/ 3.8% YoY/ 39.0% YoY/9.1% YoY to Rs648mn/Rs4,315mn/Rs780mn/Rs966mn/Rs3,275mn respectively. All the segments were EBIT positive except for tourism.
EBITDA/adjusted PAT jumps 20.2%/30.4% YoY respectively: EBITDA increased 20.2% YoY to Rs3,666mn (PLe Rs3,610mn) with a margin of 36.8% (PLe of 34.0%). Adjusted PAT stood at Rs2,947mn (PLe of Rs2,847mn) up by 30.4% YoY aided by higher other income of Rs471mn, up 81.1% YoY. Adjusted PAT margin was 29.6% (PLe 26.8%) for 2QFY24.
Con-call highlights: 1) IRCTC would get a fee of Rs40 per order pertaining to its tie-up with Zomato while railway share would be Rs16. 2) ~100 trains were booked on FTR basis in FY23. 3) For 2QFY24, agent business/payment gateway/loyalty program/marketing/I-pay revenues stood at Rs440mn / Rs170mn / Rs124mn / Rs73mn / Rs196mn respectively. 4) 11 pair of Vande Bharat trains and 18 new static catering units have been added in 2QFY24. 5) 200 catering contracts are in pipeline. 6) Share of UPI bookings was ~38% in 2QFY24. 7) 54mn AC tickets were booked in 2QFY24. 8) IRCTC catered to 891 pairs of trains pre-COVID and the current count is 1,284 trains. 9) Tejas revenue was Rs340mn for 2QFY24. 10) IRCTC produces on an average 1.2mn liters of Rail Neer bottles per day, current capacity being 1.6mn liters per day. 11) A Rail Neer plant was commissioned in Kota in 3QFY24, and 2 more plants are scheduled to be commissioned in 3QFY24.