IRCTC shares were listed on the Indian stock exchange with an IPO of Rs. 320 per share on 14th October 2019. Currently, it is traded at Rs. 1375.50. In the last year, the share price has grown by 330%.
The company has registered a shrink of 24 crores in the Q1’2020 (July) result. The 2019 June quarterly result marked almost Rs. 72.33 Cr profit. The main reason for the loss is due to the lockdown.
For the past 6 months, all the railway service was completely shut down due to the national lockdown. The share price at Rs. 1951 during the month of May 2020, which was the highest price.
Here we are not going to discuss in detail the reason for the loss. Rather we are going to discuss the fundamental, financial, and intrinsic value of the share.
This will bring you all clarity on the value of the stock.
IRCTC Financial Results:
The company has recently shared Q1’2020-21 results. The result has posted -24 crores which has plunked about 72% compared to last year. Even at this level, the stock price is trading at a 330% return.
Last year, the company has demonstrated a quarter on quarter development in FY2019-20. But in March 2020, and June 2020 quarters the revenue started bleeding.
- Return on Equity (ROE) – 44.53%
- Return on Capital Employed (ROCE) – 63.40%
- 5 years Revenue Growth – 16.52% P.A.
- 5 years Profit after tax (PAT) growth – 32.2% P.A.
There is no proper data for 5 years of EPS growth, due to more number of shares added through IPO.
- 1-yearEPS Growth – 94%
Even though the revenue has just grown at 16.52% every year, the PAT has grown at 32.2%. The main reason is not the income flow from the operation. Mainly because of IPO in 2019, where they sold out the shares to generate cash flow.
IRCTC Fundamental Analysis:
- Book value – 82.99
- Market capital – 21933 Cr.
- No of shares – 16 Cr equity shares.
- EPS (TTM) – Rs. 25.25
- P/E (Price to Earnings) – 54.39
- P/B (Price to Book Value) – 16.51
- Face Value – Rs. 10.00
- Dividend Yield – 0.91%
- Debt to Equity Ratio – 0%
These are the current fundamental stats of the company. The company promoters hold 87.4% of shares.
As per SEBI norms, a public company should have less than 75% of shares held by promoters.
FII holds 0.77%, DII holds 2.96%, Insurance The company holds 0.01%, Mutual funds hold 1.29%, and retail investors holds 8.87%.
Apart from promoters and retail investors, Others all have withdrawn more than 50% of their holdings.
- The company is trading at 17 times higher than its book value
- It is trading at 54 times more than its earnings. There is a huge drop of almost 500 Cr in revenue. Still, 54 times of earnings are too high.
- The industry P/E is 30.84. Even if the company is traded at industry P/E, the price should be Rs. 778.81. The share price is overvalued by almost 43.15%.
Excess Cash Per Share:
- Fixed Assets – Rs. 245Cr
- Current Assets – Rs. 1632 Cr
Total Liquidable Assets – Rs. 1877 Cr.
Total Liabilities – Rs. 1541 Cr
Excess liquidable Cash = Rs. 336 cr.
Excess Cash per Share = Rs. 21 per share.
Intrinsic Value of IRCTC:
As mentioned earlier the EPS (TTM) is 25.25, and the revenue growth of the last 5 years is 16.52% CAGR.
In this year, the first two quarters are in lockdown, and revenue growth of Q1’2020 is -72%. We can take an optimal growth of 10% for FY2020-21 considering Q3 and Q4 will outperform.
The intrinsic value (with 10% growth) will be – 408.6.
Even if we consider the 5 years growth of Profit after tax (PAT) which is at 32.2% per annum and margin safety with 20%
The intrinsic value will be – 800.
At a share price of 800, the P/E will be 31.68 which is ahead of the industry average P/E.
So, considering the company will grow in FY2021-2022, the intrinsic value range will be between “408.6 – 800”.
- Good ROE and ROCE.
- The 5 years Revenue growth is a strength to speak off
- Also, PAT 5 year’s growth is another added advantage.
- Promoters holding more shares
- Zero debt company
- Act as a monopoly in Indian railways service.
- The company will be in a shape to grow in FY 2021-2022.
- High P/E and P/B ratio.
- The business is affected very much in Q1 & Q2 of FY2020-21.
- Dividend yield is very low.
- Mutual funds, FII, and DII has reduced its shareholdings.
- This article is completely on the fundamental analysis of IRCTC Company.
- It has slipped in its performance with 24 Cr loss in Q1’ FY2020-21.
- The major impact is due to the lockdown.
- Despite this performance, the share price is traded at 43% higher than the intrinsic value.
- Also, share price is 54 times higher than the TTM earnings per share.
- So, please wait for the opportunity in the market and then invest in the perfect value.