Shares of IRCTC Ltd climbed over 3 percent on Friday to its fresh lifetime high of Rs 1,177.70 apiece. Stocks of state-owned railway companies have gained momentum this week, with RITES and IRCON also recording new highs ahead of the presentation of Union Budget 2020.
Since the last Budget presentation on 5 July 2019, these companies have outperformed BSE's benchmark index Sensex.
All eyes are set on the extent of fund allocation that will be made to the sector on 1 February.
In the last two years, the government has increased its annual capital expenditure towards Indian Railways. In 2018-19, the allocation rose to Rs 1.3 trillion from the earlier expenditure of Rs 40,000-50,000 crore. For 2019-20, the budget allocation for the sector stood at Rs 1.59 trillion.
Higher fund allocation is expected to enable Railway modernisation with improvement in infrastructure, electrification of network and signalling process.
Expansion of Metro projects in multiple cities are largely in construction and planning stages and are also hoped to provide business opportunities to players in this industry.
Brokerages bullish on IRCTC
Most analysts have a positive view on IRCTC, which is the only authorized entity that provides catering and ticketing services to the Indian Railways.
According to CRISIL, online rail bookings are expected to grow at approximately 8 percent compound annual growth rate (CAGR) to reach 425-435 million in the financial year 2023-24. E-booking penetration is projected to rise approximately 81-83 percent in the same period.
Parameters like high entry barrier business, strong earnings profile, diversified business segment, healthy return ratio, debt-free status, and most importantly monopoly business, work in IRCTC's favour.
Prabhudas Lilladher has placed a "buy" rating on the stock with a target of Rs 1,339, a potential upside of 18 percent from Thursday's close.
IRCTC's Board is scheduled to meet on February 12 to consider its December quarter results.