IRCTC Seen Reaching Rs 712 by Prabhudas Lilladher
IRCTC Maintains Strong Growth Prospects Amid Margin Challenges
Prabhudas Lilladher's research report on Indian Railway Catering and Tourism Corporation (IRCTC) has led to a revision in the firm's earnings per share (EPS) estimates. The research firm has cut its EPS estimates by approximately 4% for the fiscal years 2027 and 2028, primarily due to fine-tuning of margin assumptions for the internet ticketing and catering divisions.
IRCTC's recent operational performance has been weak, with an EBITDA margin of 27.3% reported in the latest period. This is below Prabhudas Lilladher's estimate of 33.1%. The decline in EBITDA margin was largely attributed to a CSR charge of INR310 million and ECL provisioning of INR160 million. However, the traction in the catering division remains strong, with a top-line growth of 26.7% recorded. Furthermore, the EBIT margin of the Rail Neer division improved to 16.1%, marking a multi-quarter high.
Capacity Expansion and Growth Visibility Drive Sales and PAT Growth
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Prabhudas Lilladher expects sales and profit after tax (PAT) compound annual growth rate (CAGR) of 8% and 9%, respectively, over the period of 2026 to 2028. This growth is expected to be driven by capacity expansion at Rail Neer, which will add four new plants, improved growth visibility in non-convenience fee income, and a healthy uptick in the catering division. IRCTC trades at 28 times and 26 times its estimated EPS for the fiscal years 2027 and 2028, respectively.
Maintaining BUY Rating with Revised Target Price
Given IRCTC's decent growth prospects, debt-free balance sheet, and healthy return ratios, Prabhudas Lilladher has retained its BUY rating on the stock. The research firm has revised its target price to INR 712, based on a multiple of 35 times its estimated EPS for the fiscal year 2028. This represents a downward revision from its earlier target multiple of 40 times.
| Fiscal Year | Sales CAGR | PAT CAGR |
|---|---|---|
| 2026-2028 | 8% | 9% |
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Investor Takeaway
Investors should consider retaining a BUY rating for IRCTC with a target price of INR712.
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