Prabhudas Lilladher has maintained a "HOLD" rating on Indian Railway Catering and Tourism Corporation (IRCTC) with a revised target price (TP) of Rs 809. The company's internet ticketing segment witnessed improved margins, touching a seven-quarter high EBIT margin of 84.7%, driven by higher yield per ticket and a shift in product mix. Revenue grew 9.5% YoY to Rs 12,247 million, primarily backed by growth in catering, Rail Neer, and tourism segments. However, the target multiple has been revised downward to 44x from 48x, reflecting conservative market valuations. The stock remains under pressure, with investor focus shifting toward non-convenience fee revenues and external business opportunities.

Q3FY25 Performance Overview

Revenue Growth and Segment Contribution
Total revenue increased by 9.5% YoY to Rs 12,247 million, marginally below estimates of Rs 12,380 million.
Catering revenue grew by 9.3% YoY to Rs 5,548 million, though EBIT margin dropped to 12.2%, missing estimates of 15.0%.
Internet ticketing revenue rose by 5.5% YoY to Rs 3,537 million, with a robust EBIT margin of 84.7%.
Rail Neer revenue saw a 15% YoY increase, reaching Rs 964 million, while EBIT margin stood at 12.3%.
Tourism revenue surged 16.1% YoY, reaching Rs 2,237 million, demonstrating the growing demand for railway-related travel packages.

Profitability & Margins

EBITDA & PAT Performance
EBITDA improved by 5.7% YoY, reaching Rs 4,166 million, with an EBITDA margin of 34.0% (vs. estimates of 33.0%).
Profit After Tax (PAT) rose 13.7% YoY, reaching Rs 3,411 million, outperforming estimates due to lower-than-expected depreciation expenses.
Net non-performing assets (NPA) reached an all-time low of 0.73%, reflecting robust financial health.

Key Business Updates

Strength in Internet Ticketing & E-Catering
Approximately 125 million tickets were booked, generating Rs 2.5 billion in convenience fee revenue.
Internet ticketing EBIT margin at 84.7% reflects efficiency gains and higher non-UPI ticket sales.
E-catering contributed Rs 150 million in revenue, with growing traction in alternative meal ordering services.
Rail Neer Expansion & Growth Projections
Three new Rail Neer plants will be commissioned in FY26, adding 2 lakh bottles per day to current 18.4 lakh bottles per day capacity.
The growing demand for packaged water in railway networks presents an upcoming revenue driver.

Future Growth Prospects

Investment in Vande Bharat & Luxury Train Tourism
Luxury train services operate at 30% margins, with FY25 revenue estimates at Rs 950 million.
8 Bharat Gaurav trains launched for Kumbh Mela, expanding tourism revenue streams.
Maharaja Express contributed Rs 380 million in Q3, reflecting strong premium travel demand.
Potential in Non-Railway Catering & Payment Integration
IRCTC is actively exploring non-railway catering, including corporate and institutional contracts.
The company has applied for a payment aggregation license from the RBI, which, if approved, could enhance digital transaction monetization.

Valuation & Investor Considerations

Revised Financial Estimates & Target Price

Key Observations:

PAT CAGR expected at 8% between FY25-FY27, driven by stable revenue growth and cost efficiency.
Valuations have been moderated, with a 44x P/E multiple applied vs. previous 48x.
Dividend yield remains modest at 1.0%, aligning with capital reinvestment strategy.
Technical Analysis & Stock Performance
Support & Resistance Levels
52-week High: Rs 1,148
52-week Low: Rs 736
Current Market Price (CMP): Rs 751
Near-term Resistance Levels: Rs 790, Rs 820
Support Levels: Rs 740, Rs 710
Stock Outlook:

Despite a 20% decline over the last 12 months, IRCTC remains fundamentally strong.
The stock’s short-term trend suggests consolidation, with support near Rs 740 and upside capped at Rs 820.

Investment Risks & Considerations

Challenges & Regulatory Changes
Integration of SwaRail App: The Ministry of Railways' launch of SwaRail app for ticketing services may impact IRCTC’s monopoly in internet ticketing.
Market Valuation Concerns: The current P/E ratio of 45.9x suggests limited upside from current levels.
High Government Ownership: With 62.4% promoter holding, any stake dilution by the government could impact stock performance.

Conclusion & Final Take

IRCTC maintains its market leadership in online railway ticketing and catering, with steady revenue growth.
Internet ticketing remains the strongest segment, while expansion into e-catering and tourism supports long-term growth.
Rail Neer and luxury trains provide additional revenue levers, with operational efficiency gains reflected in margin stability.
Valuation concerns persist, with the stock trading at 45.9x FY25 earnings, suggesting a neutral outlook for near-term investors.
Investor Advice
Short-term traders may focus on price action near Rs 740 support levels.
Long-term investors should monitor expansion efforts in non-railway catering and digital payment services.
The "HOLD" rating reflects balanced growth expectations, but any unexpected policy changes could affect outlook.