IRCTC share price closed today is Rs 2094.8, up Rs 173 or 9%. IRCTC share price reached a high of Rs 2113.85 today. IRCTC market cap today is over Rs 33500 cr. Technical Analyst Nilesh Jain, who is Assistant Vice President (AVP), Equity Research Technical and Derivatives at Centrum Broking says that IRCTC scaled to fresh new highs and also provided a big breakout on the chart. The momentum is likely to continue towards Rs 2200 support is placed at Rs 1960. One should wait for some correction for fresh entry; those who are already holding can remain long with a trail stop loss.

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IRCTC offers highly scalable and unmatched opportunities to exclusively participate in the growth story of Indian Railway (IR) traffic growth, Train tourism and Hospitality (Catering+Packaged Drinking Water, Accommodation). Robust adoption of online ticketing during pandemic, conversion of unreserved coaches into 2S category boosting TAM for Ticketing, multi-fold scale-up in PDW capacity, entry into passenger rail operations (3 trains, more to follow) and 60% jump in catering pricing are likely to act as a ‘profit windfall’ in coming quarters and should boost the financial growth, return ratios, and operating metrics for IRCTC.

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The multiple levers for growth,  would be more than sufficient to cover up for growth loss due to COVID pandemic. Factoring in the opportunities across business segments and the huge scale/multitude opportunities that IR offers along-with gradual expansion in non-IR revenue stream (E-catering, air/bus ticketing, hotel booking); we expect a revenue/earnings CAGR of 16%/23% over FY20-25E, and initiate coverage on IRCTC with a target price of Rs 2650 valued at 40x PER on FY23E of Rs. 66).

IRCTC is offered a monopolistic opportunity in online rail ticketing, sale of Packaged Drinking Water (PDW) and catering services (in Train as well as 600 stations) for Indian Railways. Contrary to most other monopolistic plays, IRCTC assures low pricing and high quality experience for its customer base. The ticketing business operational prowess has been proven as it has achieved massive 73% penetration in FY20 on internet booking (during Pandemic 90%+). Its PDW brand (Rail-Neer) sells water cheaper by 33% compared to other branded alternatives. Catering business exclusivity ensures quality, pricing and availability to travelers.

Low risk business model:

As an administrative agency, IRCTC charges fixed mark-up or license fee to its third-party vendors in catering, PDW, hospitality segment and passes on IR their due share, based on a predetermined ratio. In the Catering business, it clocked Revenue of about Rs. 10.4Bn in FY20 with near zero-risk on demand or food inflation as it outsources it to contractors. Rail-Neer profitability is healthy at 19% as IRCTC has confirmed demand; no marketing spends and scale advantage (lead distance on distribution to reduce). Tourism biz has a fixed mark-up on aggregation and leverages its IRCTC brand and portal for leads, saving on marketing spends. In the ticketing business there is complete exclusivity for IRCTC. The only risky business is that of being a Train Operator (13% of rev) that functions on occupancy risk.