IRCTC shares continue to fall for third straight day; should investors worry?

IRCTC share price: Indian Railway Catering and Tourism Corporation (IRCTC) shares continued to fall for a third straight session on Monday. The stock of IRCTC — the only firm authorised by the Indian Railways to offer online railway ticket booking services and manage food services on trains in the country — fell by as much as Rs 11.4 or 1.8 per cent to Rs 634.1 apiece in intraday trade on BSE before settling at Rs 643.8 apiece for the day. 

IRCTC shares have gained 2.7 per cent in value in the past one month, in line with a three per cent rise in the headline Nifty index.

"The demand for train travel is poised to remain strong in India, in a long-term positive for IRCTC, especially given the high airfares," AK Prabhakar, Head of Research at IDBI Capital Markets, told Zeebiz.com. 

"The Odisha train mishap, which is one of the worst in 10-15 years, will only lead to better, safer systems going forward... Things are only set to get better. Demand for train travel is likely to stay intact," he said.

On Friday, a triple train accident in Odisha's Balasore district left at least 288 people dead and more than 1,100 injured. The crash, one of the worst in more than two decades, involved a Bengaluru-Howrah Superfast Express train, a Shalimar-Chennai Central Coromandel Express and a goods train. Catch latest updates on Odisha train tragedy here

Indian Railways transports more than 13 million people every day.

Last week, IRCTC reported a mixed set of results for the January-March period and announced a dividend of Rs 2 per share. IRCTC reported a 30.4 per cent year-on-year increase in net profit to 278.8 crore and 39.7 per cent growth in revenue to Rs 965 crore for the quarter ended March 2023. 

Its margin, however, contracted by 667 basis points compared with the corresponding period year ago to 33.64 per cent.   

Analysts said the company continues to enjoy a monopoly in the business but the rising contribution of its catering business poses pressure on its margin and the stock is relatively more expensive among railway-related stocks. 

Here's how the company's revenue fared across segments:  

• Catering: up 49 per cent at Rs 395.8 crore  
• Rail Neer (packaged drinking water): up 34 per cent at Rs 73.4 crore 
• Internet ticketing: up one per cent at Rs 295.1 crore 
• Tourism: up 155 per cent at Rs 138.5 crore 
• State Teertha (pilgrimage trains): up 154 per cent at Rs 65.4 crore

IDBI Capital reiterated its 'buy' rating on the IRCTC stock after the earnings announcement along with a target price of Rs 740 — which translates to an upside of 14.6 per cent from the closing price on Friday. The brokerage values the stock at a multiple of 47 times its estimated earnings for the financial year ending March 2025. 

Prabhakar said investors can use dips to add the stock to their portfolio. 

With inputs from agencies

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