Miniratna IRCTC: This Dividend Paying Railway Stock Logs Huge Buying From Mutual Funds; Buy Or Hold?

Although railway stocks have seen a massive bull bandwagon in 2023, the government's railway category services provider IRCTC has witnessed a seesaw-like performance. Nevertheless, the stock has seen to pick-up momentum in recent times, and its long-growth drivers have caught the attention of mutual funds. This dividend-paying railway stock was the top buying by AMCs during October 2023 in the large-cap basket.

As per the data from ICICI Direct Research, AMCs pumped Rs 829 crore in IRCTC shares, which is higher by 44.7% from investment of Rs 573 crore in September 2023. Also, there has been a huge spike in the number of shares held by these AMCs.

In October, AMCs together held 1.25 crore shares in IRCTC, which is nearly 49% up from 84 lakh shares held in the previous month.

IRCTC shares performance in the past 1 year has been bittersweet. Its monthly gains are currently 5% on BSE, while year-to-date, the share has risen by a little over 8%.

On November 28th, the stock traded at Rs 695.05 apiece, marginally up from the previous session. the stock's m-cap was over Rs 55,604 crore. Its 52-week high and low are at Rs 758.10 apiece and Rs 557.15 apiece respectively.

Recently, this month, IRCTC shares turned ex-dividend on November 17th for payment of an interim dividend of Rs 2.50 per share on a face value of Rs 2 each for FY24. In percentage terms, the dividend payout will be 125% and in value terms will be to the tune of Rs 160 crore.

Also, the 24-year-old Miniratna has reported a net profit of Rs 294.67 crores in the September Quarter of FY 2023-24 marking an increase of 30.36% from Rs 226.03 crores in Q2 of FY 2022-23. The net profit registered is the highest-ever profit registered by IRCTC in the history of IRCTC for this Quarter.

There are still more steams in the engines of this railway stock for potential upside ahead. At the latest, BP Wealth has recommended 'Buy' on IRCTC shares for a target price of Rs 769, which indicates over 10% upside from current levels.

Post Q2 results, Dolat Capital in its research note said, "Commentary remains confident based on continued addition in new contracts in Catering (more 200 in the pipeline for TSV), capacity addition in Rail Neer (1 added in Q1, 2 by end of FY24) plants and a significant jump in new tour-routes (doubling in CY23) in the Tourism SBU," adding, "We believe FY24 to see Tourism led demand across all biz units & thus would expect it to deliver healthy performance. We Maintain an Accumulate rating with a DCF-based TP of Rs. Rs720 implies 40x on 26E earnings."

Furthermore, IDBI Capital in its note said, "There is a pipeline of 200 trains for train side vending and 451 Vande Bharat trains can be added in the coming years. As a result, we are building robust growth in catering and Tourism revenues resulting in CAGR growth of 18% & 29% over FY23-FY25E. The company has added 1 new rail neer plant in Kota and will commission 2 new plants in Q3FY24E. As a result, we have built-in 11% revenue CAGR for rail neer over FY23-FY25E. We have kept our estimates unchanged and hence we are keeping our target price unchanged at Rs745 (45x FY25E EPS). However, considering the recent run-up in price we downgrade the stock from BUY to HOLD."

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.