PremiumIndian Railway Catering and Tourism Corp (IRCTC), which entered the primary markets by listing in October 2019, and enjoys a strong monopoly as it is the only entity authorised by Indian Railways to offer online railway tickets has surged over 600% from its IPO (initial public offering) issue price of ₹320. The stock is now trading at ₹2,277 per share, up 63% in one year and trading near its all-time high level of ₹2,283.6.
Domestic brokerage and research firm Anand Rathi sees more upside in the stock despite huge returns that it has given to investors. The brokerage said that the company is enjoying virtual monopoly with its business model offering major tourism related services on all aspects under one roof.
''Considering, the company’s strong earnings profile, diversified business segment, healthy return ratio, debt free status and most importantly high entry barrier to the business with reasonable valuation, we recommend a Buy rating on the stock with a target price of ₹2,850 per share,'' Anand Rathi said in a note.
IRCTC has a robust balance sheet as the operating cash stood at Rs.15,300 million as on 31st March 2021 and the fact that it is a debt-free company validates our financial discipline, it said. Additionally, the brokerage believes it has an attractive valuation as over the years and the company is aspired to maintain healthy ratios through a prudent risk management and capital allocation strategy as RoE stood at 28% over the past 5-years.
''Going forward, management expects to reach the pre-COVID level very soon after the resumption of Tejas Express, increase in convenience revenue to~25%, capacity expansion of Rail Neer and the impact of price hike announced in catering will play out by then,'' the note stated.
It also the only entity authorised to manage catering services on trains and major static units at railway stations. The company also enjoys a monopoly in packaged drinking water. It’s the only entity authorised by the Ministry of Railways to manufacture and distribute packaged drinking water at all railway stations and trains under the ‘Rail Neer’ brand.
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