ICICI Securities Sees 17% Return In This Miniratna Small Cap Stock, Target Price Rs 160, Buy

Leading brokerage firm ICICI Securities has assigned buy rating to the miniratna small cap stock, Railtel Corporation of India Ltd with a target price of Rs 160 apiece. Buy Railtel Corporation of India today for securing 17% return.

The current market price of the stock is Rs 137 apiece. Railtel shared strong guidance: 1) revenue / EBITDA growth of 20% in FY23 and beyond; 2) project business revenue of Rs10bn in FY23 (Rs15bn possible in FY24 with pick-up in execution); orderbook is healthy at Rs45bn (reassessment has led to a decline from Rs58bn from Q1FY23); 3) addition of new services especially consultancy, as well as monetization of certain assets, will provide an upside; and 4) Kavach and allied services will likely lend significant delta to EPS. Check key takeaways below:

1. Railtel Corporation Stock Outlook

The current market price of the stock is Rs 137 apiece with 52-week high at Rs 144 apiece and 52-week low is Rs 84 apiece, respectively. The company has a market capitalisation of Rs 4408 crore.

2. Railtel Corporation of India Return

The shares has given return of 8% in 1-week, 30% return in 1-month, 40% return in 3-months, and 13% return in 1-year.

3. Railtel Corporation EBITDA fell 8.6% YoY (rose 50% QoQ)

Railtel revenue rose 19.6% YoY (14% QoQ) to Rs4.3bn. Telecom services revenue grew 11% YoY to Rs3bn. Project revenue rose 45% YoY to Rs1.3bn. Telecom EBIT rose 14.6% YoY to Rs811mn. Volatility in unallocated expenses caused volatility in telecom segment EBIT performance vs consolidated EBIT. Telecom revenue grew 10.9% YoY (7.6% QoQ) to Rs3bn. Railtel expects revenue to accelerate on rising execution of projects, while the Kavach project has large upside in the medium term.

4. Project Orderbook

The project orderbook stood at Rs58bn in Q1FY23, and the company has reassessed and adjusted it to Rs45bn. The orderbook has Rs20bn worth of orders from the Railways and Rs25bn from non-railway segment (largely PSUs). Railtel has added >Rs8bn worth of orders in FY23-TD. Project services revenue increased 45% YoY to Rs1.3bn and the company anticipates FY23 to end with a revenue base of Rs10bn.

5. Valuation

According to ICICI Securities, "we increase our EPS estimates by 3-11% over FY23EFY24E, and target price to Rs160 (from Rs120), as we raise the P/E multiple to 18x FY24E EPS (earlier: 17x). Maintain BUY. Risks: Slower revenue growth particularly in project services, and lower margins in telecom services."

6. About Railtel Corporation

RailTel Corporation a "Mini Ratna (Category-I)" PSU is one of the largest neutral telecom infrastructure providers in the country owning a Pan-India optic fiber network on exclusive Right of Way (ROW) along Railway track.

RailTel was incorporated on September 26, 2000 with the aim of modernizing the existing telecom system for train control, operation, and safety and to generate additional revenues by creating nationwide broadband and multimedia network, laying optical fiber cable using the right of way along railway tracks.

Disclaimer

The stock has been picked from the brokerage report of ICICI Securities. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.