📢 5 STEPS TOWARDS WEALTH 🚀 The Indian Stock Market Way
IRCTC: CMP: 918 LONG TERM GR: 18% | Q1_fy25 GR: 12% | RESULTS Update
(Strong Cattering and Railneer growth, but food inflation has kept margin under pressure)
### **🏢 Company Overview**
IRCTC, a Mini Ratna Public Sector Enterprise under the Ministry of Railways, is engaged in four business segments: Catering Services, Internet Ticketing, Travel and Tourism, and Packaged Drinking Water under the Rail Neer brand. It is a significant player in the Indian travel and tourism industry, with a strong focus on digital ticketing services and premium travel offerings. The IRCTC was established on 27 September 1999, as the only entity that is authorized to provide certain services to the Indian Railways, including online ticketing, catering, and selling drinking water on trains and at railway stations. A Central Public Sector Enterprise having 62% stake by the Government of India and under the administrative control of the Ministry of Railways.
### **🌐 Industry Overview**
The Indian travel and tourism industry is poised for growth, driven by increasing domestic tourism, government initiatives, and the expansion of digital platforms. The industry faces challenges from fluctuating fuel prices and competitive pressures, but IRCTC's dominant position in railway ticketing and diversified service offerings place it in a favorable position.
### **🧑🤝🧑 Peer Group Analysis**
IRCTC's primary competitors include MakeMyTrip, Yatra, and Cleartrip in the online travel segment. However, IRCTC has a unique advantage with its monopoly in Indian railway ticketing and a strong brand presence in the catering and tourism sectors.
### **📜 Historical Performance**
IRCTC has consistently shown strong financial performance with steady revenue growth and profitability. The company has a robust balance sheet with minimal debt and healthy cash reserves, allowing it to invest in new ventures and technology upgrades.
**📜 Fy_2016**: Sales of 1400 Cr & Profits of 200 Cr.
**📜 Fy_2019**: Came with the IPO when Sales & profits were around 1900 Cr & 300 Cr Respectively. IPO price was 64 (ex Split).
History of IRCTC says it never made losses since its inception. Considering strong revenue growth along with consistent profits we have strongly recommended during the IPO expecting 15% sales growth and consistent Profits & high dividend Yields.
**📜 Fy_2021**: Covid year when mobility was restricted. Sales & Profits declined to 800 Cr & 200 Cr respectively. Share price was 400.
**📜 Fy_2024**: Sales and Profits reached nearly 4400 Cr and 1200 Cr respectively. Share price reached 1000.
Overall, we saw the near to 15X rally in the share price since IPO along with consistent dividends payout which is near to 40% of total profits made by the company.
### **📊 Q1 FY25 Financial Performance Overview**
1. **📈 Consolidated Sales and Profit Growth**:
- **Sales Growth**: IRCTC reported a consolidated sales growth of 11.8% in Q1 FY25 compared to Q1 FY24.
- **Profit Growth**: The consolidated profit for Q1 FY25 saw an increase of 33% compared to the same quarter in the previous year, Q1 FY24. But this was due to large exceptional loss last year, hence real profit growth is just 10%.
2. **💼 Segmental Revenue Growth and Share**:
- **🍽️ Catering Services**: Revenue grew by 17% YoY and contributes 50% to total revenue.
- **🎟️ Internet Ticketing**: This segment saw a revenue growth of 13% YoY, making up 29% of the total revenue.
- **🌍 Tourism**: The tourism segment revenue declined by 13% YoY, contributing 11% to the overall revenue.
- **💧 Rail Neer**: The segment revenue grew by 17% YoY, accounting for 10% of the total revenue.
3. **📊 Profit Margins Comparison**:
- **EBITDA % Margin**: Decreased from 33.2% in Q1 FY25 from 33.9% in Q1 Q1 FY24.
- **Net Profit Margin**: Increased from 27.5% for Q1 FY25, up from 33.9% in Q1 FY24, but this was due to exceptional loss during last year.
### **📉 Financial Ratios Analysis**
1. **Profitability Ratios**:
- **Return on Equity (ROE)**: 16.5% in Q1 FY25, up from 15.8% in Q1 FY24.
- **Return on Assets (ROA)**: 8.5%, a slight improvement from 8% in the previous year.
2. **🏦 Earnings Ratios**:
- **Earnings Per Share (EPS)**: INR 3.9 for Q1 FY25, up from INR 2.9 in Q1 FY24 due to exceptional loss of 76 Cr last year.
- **Price to Earnings (P/E) Ratio**: The P/E ratio stands at 62x based on Trail Q1 FY25 earnings.
3. **💳 Leverage Ratios**:
- **Debt to Equity Ratio**: Remains low at 0.1x, reflecting a strong balance sheet.
- **Interest Coverage Ratio**: Improved to 129x, up from 80x in Q1 FY24.
4. **💹 Valuation Ratios**:
- **Price to Book Value (P/BV)**: 23x, which is consistent with the previous quarters.
- **Enterprise Value to EBITDA (EV/EBITDA)**: 18x, reflecting steady operational performance.
### **📝 Q1 FY25 Results Insights and Highlights**
- IRCTC continues to leverage its dominant position in the railway ticketing space while expanding into other lucrative segments.
- The "One India - One Ticket" initiative is expected to significantly enhance the customer experience and contribute to revenue growth.
- The company’s margins remain healthy, supported by operational efficiencies and higher revenue from its internet ticketing and catering segments.
### **🔮 Near term Outlook**
We may see this year Sales growth of 15% & profit growth of 19%. This could take the current Trail EPS of 14.88 to 16.6 till year end while PE from the current 62 to 55 at CMP. New additions can be done during any fall near 657 while targets for this year should be 1305.
### **🔮 Future Outlook**
The outlook for IRCTC remains positive, with expected growth in digital ticketing, increased travel post-pandemic, and new initiatives like the "One India - One Ticket" platform, which integrates various modes of transport for a seamless travel experience. The company's focus on expanding its tourism services and enhancing customer experience through technology will likely drive future growth. We can expect 15% cagr growth even this decade. Such a growth can take the company's sales towards the benchmark of more than 15000 Cr revenue and 4500 Cr Profits till fy_30. Multi Year rally along with high and consistent dividends can be expected.
**⚠️ Disclosure:** The information provided above is for educational and informational purposes only and should not be considered as financial advice.
