This Monopoly Stock Posts Highest Ever Quarterly Profit

When you hear the word 'Monopoly', you directly think of the board game that has become one of the most popular games in the world.

In this board game, every player is given a set amount of money in their bank account to start. They take turns rolling the dice and make investment decisions, transact among themselves, and the bank.

In the investing world, a monopoly is referred to a business where the company dominates the entire industry and controls majority of the market share.

Individuals are left with no other alternatives and the monopoly business ends up having incredible pricing power.

We couldn't think of a better Indian company than IRCTC while referring to monopoly businesses.

Indian Railway Catering and Tourism Corp (IRCTC), which entered the primary markets by listing in October 2019, enjoys a strong monopoly. It has 100% market share in the rail network.

IRCTC is the only entity authorised by Indian Railways to offer online railway tickets. The company charges convenience fees in the range of Rs 15-30 per ticket.

It's also the only entity authorised to manage catering services on trains and major static units at railway stations.

The company also enjoys a monopoly in packaged drinking water. It's the only entity authorised by the Ministry of Railways to manufacture and distribute packaged drinking water at all railway stations and trains under the 'Rail Neer' brand.

IRCTC has seen a sharp jump in online ticketing volumes over the past decade. Having a monopoly in railway ticketing, it fetches operating margins as high as 80% compared to barely 10% and 20% margins in the catering and packaged water businesses.

The company recently declared its earnings for the second quarter of FY24.

Let's take a look at the numbers and what lies ahead for this monopoly stock.

IRCTC Q2 Results

On 7 November 2023, IRCTC reported a 30.4% jump in its standalone net profit to Rs 2.9 billion (bn). This compared to a profit of Rs 2.3 bn reported in the same quarter last year.

On a sequential basis, the net profit was up 26.9%.

The net profit was the highest ever profit registered by IRCTC in its history.

The company's revenue saw a jump of 23% to almost Rs 10 bn during the quarter under review against Rs 8.1 bn reported last year.

The company's sales from state teertha segment surged 119% while the catering segment was the second-largest revenue contributor, witnessing a jump of 29%.

The sales for the tourism segment jumped 39%.

Along with Q2 earnings, the travel support services company also approved the formation of a wholly-owned subsidiary for IRCTC's I-Pay business.

IRCTC declared an interim dividend of Rs 2.50. The record date for the same has been fixed as 17 November 2023.

What Next?

Note that shares of IRCTC have traded in a rangebound manner ever since there was a rejig in its management.

The underperformance could also be attributed to the weak show in Q1 of FY24.

However, the company is optimistic ahead of the festive season, which has already started in some sense.

The PSU company has already lined up a slew of offering on air ticket bookings, etc. For instance, it ran a campaign where it did not charge any convenience fees on international as well as domestic flight ticket bookings on its website.

Last month, Devyani International, which operates brands like KFC, Pizza Hut, and Costa Coffee in India, joined hands with IRCTC to bid for railway food court contracts.

Even Zomato had tied up with IRCTC to supply and deliver preordered meals through IRCTC's online catering portal at select stations.

The company is looking to increase the number of trains for which it provides catering services to drive growth.

It is also commissioning new Rail Neer plants to increase production capacity.

IRCTC is set to see increasing demand as the government plans setting up more railway lines. The company is also taking strategic initiatives, such as launching a special train for Sikh pilgrims and expanding its ticketing services, including online booking for helicopter service to Kedarnath Dham.

Furthermore, the company anticipates tourism to improve, led by the increase in travelling and the introduction of new Vande Bharat trains.

Overall, the management remains optimistic about its growth, especially during the upcoming tourism season.

How IRCTC Share Price Has Performed Recently

Shares of the company fell up to 1% in early trade today, a day after it announced Q2 earnings.

On a YTD basis, the stock is up 5%.

IRCTC has a 52-week high of Rs 771 touched on 9 November 2022 and a 52-week low of Rs 557 touched on 29 March 2023.

At the current price, the company trades at a PE multiple of over 50x and a price to book value of over 20x.

Here's a table comparing IRCTC with its relative peers.

Comparative Analysis

Company	IRCTC	Easy Trip Planners	Thomas Cook	Transcorp Int.
ROE (%)	46.3	46.9	0.1	0.8
ROCE (%)	63.1	54.6	3.1	7.2
Latest EPS (Rs)	13.2	0.8	1.2	0.1
TTM PE (x)	51.3	55.1	114.1	352.4
TTM Price to book (x)	20.1	18.6	3.6	1.9
Dividend yield (%)	0.8	0.0	0.3	0.7
Industry PE	53.8
Industry PB	13.1

Data Source: Ace Equity

To know more, check out IRCTC's financial factsheet and its latest quarterly results.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...