02 Nov , 2021 By : Kanchan Joshi
Indian Railway Catering & Tourism Corporation's (IRCTC) Q2 net profit from continuing operations surged to Rs158.5 crore, up 386% year-on-year (YoY), on the back of low base. The company had reported a profit after tax of Rs32.6 crore in the same quarter last year. Shares of IRCTC were trading 0.4% lower at Rs851 apiece on the BSE in Tuesday's deals.
IRCTC’s operational performance was in-line with Prabhudas Lilladher's estimates driven by high operating leverage of ticketing division amid shift in volumes to 2S category the brokerage said in a note. “Events like recent policy flip flop on convenience fee share with IR’s can result in valuation overhang. Consequently, we recommend HOLD with a TP of Rs779 (earlier under review)," it added.
Its revenue from operations for the second quarter surged 357% to Rs405 crore as compared to Rs88.5 crore year-on-year (YoY). All segments registered massive growth in the July-September period as compared to last year.
“Taking into account strong performance, improving fundamentals, huge opportunity at hand and the potential risks that it carries given dependency on Railway’s policy making; we think the current valuations of 70x TMF earnings do not carry any margin of safety and thus would prefer better entry points in to the stock," said Dolat Capital in a note. The brokerage has assigned Reduce rating on IRCTC with target price of Rs800.
IRCTC enjoys a strong monopoly as it is the only entity authorised to manage catering services on trains and major static units at railway stations. IRCTC shares turned ex-split last week after the board had approved a 1:5 stock split on August 12, to help enhance liquidity in the capital market, widen shareholder base and make the shares affordable to the small investors.
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