The IRCTC share price closed today is Rs 2,094.8, up from Rs 173 or 9%. The IRCTC share price peaked at Rs 2,113.85 today. The market capitalization of IRCTC is today above Rs 33,500 cr. Technical analyst Nilesh Jain, who is Assistant Vice President (AVP), Equity Research Technical and Derivatives at Centrum Broking, says the IRCTC has reached new heights and also provided a big breakthrough on the chart. The momentum is likely to continue towards the support of Rs 2200 is placed at Rs 1960. We have to wait for a correction for a new entry; those who already hold can stay a long time with a stop loss.
The IRCTC offers highly scalable and unparalleled opportunities to participate exclusively in the history of Indian Railways (IR) traffic growth, rail tourism and hospitality (catering + conditioned drinking water, accommodation). Robust adoption of online ticketing during pandemic, conversion of unreserved coaches to Category 2S increasing TAM for ticketing, multiple increase in PDW capacity, entry into passenger rail operations (3 trains, more to follow) and increase 60% of catering rates are likely to act as a “profit sheath” over the next few quarters and are expected to drive IRCTC’s financial growth, performance ratios and operating metrics.
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The multiple growth levers would be more than enough to cover the loss of growth due to the COVID pandemic. Consider opportunities in all business segments and large scale / multiple opportunities offered by IR, as well as the gradual expansion of non-IR revenue streams (electronic catering, airplane / bus ticketing, hotel reservation ); we are forecasting a 16% / 23% revenue / earnings CAGR on FY20-25E, and initiating coverage on IRCTC with a target price of Rs 2650 valued at 40x PER on FY23E of Rs. 66).
The IRCTC is given a monopoly opportunity for online rail ticketing, sale of packaged drinking water (PDW) and catering services (on the train as well as in 600 stations) for Indian railways. Unlike most other monopoly games, IRCTC guarantees low prices and a high quality experience for its customers. The operational prowess of the ticketing industry has been proven as it achieved a massive 73% penetration in FY2020 on internet booking (during the 90% + pandemic). Its PDW (Rail-Neer) brand sells water 33% cheaper compared to other branded alternatives. The commercial exclusivity of the catering guarantees quality, prices and availability for travelers.
Low risk business model:
As an administrative agency, the IRCTC charges a fixed mark-up or license fee to its third-party suppliers in the catering, PDW, hospitality sectors and forwards to IR their share due, on the basis of a predetermined ratio. In the catering sector, it recorded revenues of around Rs. 10.4 billion in fiscal year 2020 with almost no risk of demand or food inflation as it subcontracts them to sub. -treaters. Rail-Neer’s profitability is healthy at 19% because the IRCTC has confirmed the request; no marketing expenses and advantage of scale (distance ahead of distribution to be reduced). Tourism biz has a fixed margin on the aggregation and leverages its brand and IRCTC portal for prospects, which saves on marketing expenses. In the field of ticketing, there is total exclusivity for the IRCTC. The only risky job is that of being a train operator (13% of the rev) which operates on the risk of occupancy.