IRCTC report says tourism business on strong footing

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

Rating: HOLD | CMP: Rs644 | TP: Rs679

Q4FY23 Result Update - Tourism business on strong footing

Quick Pointers:

§ In 4QFY23, ~104mn tickets were booked yielding convenience fee revenue of ~Rs1,970mn.

While we increase our FY24E/FY25E revenue estimates by ~4% odd as we tweak our tourism segment projections to incorporate benefits of Bharat Gaurav initiative, our EPS estimates broadly remain intact given it is a relatively low margin business. Indian Railway Catering & Tourism Corporation’s (IRCTC IN) results were broadly in-line with revenues of Rs9,650mn (PLe Rs9,442mn) and EBITDA margin of 33.6% (PLe 36.0%). We expect sales/PAT CAGR of 11%/13% over FY23-FY25E given 1) traction in non-convenience revenue 2) rail neer expansion and 3) Bharat Gaurav initiative. IRCTC trades at 44x/41x to our FY24E/FY25E EPS estimates and we believe current valuations are fair in absence of meaningful growth levers. Consequently, we maintain our ‘HOLD’ rating on the stock with a TP of Rs679 (45x Sep-24 EPS of Rs15.1). We have changed our valuation methodology (earlier DCF) considering sufficient trading history to benchmark and our target P/E multiple is broadly in-line with past average (refer exhibit 3 for more details).

Revenue increases 39.7% YoY: Revenues increased 39.7% YoY to Rs9,650mn (PLe of Rs9,442mn). Revenues from State Teertha/Catering/Rail Neer/Tourism/Internet Ticketing increased 153.5% YoY/48.7% YoY/34.4% YoY/155.4% YoY/0.8%YoY to Rs654mn/Rs3,958mn/Rs734mn/Rs1,385mn/ Rs2,951mn respectively.

EBITDA/adjusted PAT jumps 16.5%/16.1% YoY respectively: EBITDA increased 16.5% YoY to Rs3,246mn (PLe Rs3,402mn) with a margin of 33.6% (PLe of 36.0%) as against 40.3% in 4QFY22. After adjusting for exceptional items of Rs258mn relating to excess provision written back over 1) performance related pay, 2) maintenance charges for internet ticketing, and 3) other expenses, PAT increased by 16.1% YoY to Rs2,530mn (PLe of Rs2,586mn).

Con-call highlights: 1) Online ticketing penetration is ~82%. 2) Roughly, 430mn tickets were booked in FY23. 3) Revenue from I-Pay was Rs673mn in FY23. 4) Share of UPI bookings stood at 33% in FY23. 5) Catering reach is ~492/675 trains via pantry cars/TSV respectively, and 300 contracts are in pipeline. 6) Steady state margin in catering business is ~10-12%. 7) Receivable days will soon decline as IR’s will pay IRCTC 68.5% of billed revenue the following day. 8) Capacity utilization of Rail Neer plants was ~73% in FY23. 9) The daily production capacity of Rail Neer will increase from 15.2 lac litres in FY23 to 17 lac litres in FY24E and 18.5 lac litres in FY25E. 10) In FY24E, Bharat Gaurav trains can earn Rs2,500mn in revenue with a margin of ~10%. 11) Revenue from Maharaja Express was Rs554mn in FY23. 12) Ticketing mix is as follows: Sleeper class/2S/3rdAC/2ndAC at 42.8%/12.5%/28.3%/6.9% respectively.13) Revenue/opex of Tejas Express was Rs1,550mn/Rs1,300mn during FY23.

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