Indian Railway Catering and Tourism Corporation or IRCTC is an Indian Central Public Sector Enterprise under the Ministry of Railways, mainly handling booking and hospitality aspects for Indian railways. It has a monopoly for this industry granted by the Indian Government and, thus, has no threat of competition.
Its median PE has been 79.8 and is currently trading at a PE of 68.6 and a PB of 30. Some of the reasons the IRCTC share enjoys trading at such absurd valuations are:
It is an almost debt-free company with healthy profit growth of 23.8% CAGR over the last five years, and Additionally, it maintains a healthy dividend yield of 0.5%. It has recently improved its debtor days from 161 to 111 days. But even after growing its revenues and profits at an incredible pace post the covid anomaly and complete stoppage in tourism and travel in India, it has only managed to get back to its 2019 sales figures at a growth rate of 4.34% over the past five years.
However, it has done so while almost doubling its profitability, raising its net income from 3.09 billion in 2019 to 6.64 billion in 2022, while its sales have just grown from 18.7 billion to 18.8 billion. This shows a massive improvement in IRCTC’s operating efficiencies, reducing its operating expenses from Rs. 876.64 crore in 2019 to Rs. 478.70 crore in 2022.
Stock market analysts claim that the Indian Railway’s decision to cancel its offer for a data monetisation initiative is the primary reason for the recent sell-off in IRCTC share price. The recent rise of its stock prices is speculative, and it is now expected to have stabilised to its true fundamentals, owing to the recent speculative price increase, the firm’s fundamentals remain solid. The Indian Railways will increase the number of tickets sold online, creating a favourable environment for the state-owned enterprise.
Despite worries about how inflation may affect its operational costs, IRCTC has reported a strong set of earnings figures. Its dominant position instead of its monopoly in the industry and solid financial position help maintain the IRCTC share price NSE popular with investors. Post-Covid, there have been various adjustments to the ticketing standards. Additionally, the government has announced that it plans to raise Rs. 3,000 crore via the dilution of a 3.5% stake in IRCTC via an offer for sale. The demand for this is volatile, and it remains to be seen how it reflects on its prices.
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