Agree - 100%, its possible that its being manipulated and this dream of a new age business is being sold to retail.
Not taking anything away from the investors points that its a monopoly and a new age ticketing giant combined with wallet + food delivery and other growth triggers. But at the end of the day, even Coal india & ONGC are also a monopoly, will IRCTC be allowed that pricing power due to monopoly in future is the key question and are those things i.e. monopoly business + growth triggers already more than priced in at 300+ PE is what begs this question.
Couldnt resist but respond, the 300 - 400 PE being spoken is trailing & of the covid impacted period hence I would think not being used fairly.
All reports point to a normal EPS for this quarter being upwards of 12-13, giving an annualized EPS of close to 55, you might want to refer to the attached report which gives an indication of things to come
Agreed Arun , its trailing but still it trades at roughly ~75 Fwd PE whereas lets say just for a random comparison , Google (a new age , growing and monopolistic business) trades at a trailing PE of ~30.
On a side note , the Dolat capital report increased the price target from somewhere like 2800(augâ21) to 5000+ (current), without significant upgrade to the EPS. Please correct me if I am missing something on the report. I understand the unlock triggers etc. But , if not materially off then is it not just chasing the price momentum even from the brokerage house?
Agree with Parth here. Many government companies were monopoly once. Anytime government regulations can take away pricing power or allow third party entry into the ticketing business. If Government could waive off ticketing fees once during Covid, it could do it again. Also when railways is extensively planning private participation in running trains to maintaining stations, there is all possibility that going forward this monopoly will get challenged. Also government can tie this business up with capital intensive divisions and take away asset light model. This business is not anti-fragile as it seems nor a monopoly as it seems. Due to regulatory risk, buying at very high valuations can skew risk reward in wrong direction. Narratives are build around price levels in bull market and it is getting sold.
I have seen very few research reports which put their neck out & give a 100% price appreciation target, most of them, if not all tend to be in the range of 10-25% price band
Thanks
The good thing about such research reports is that, you have a range of opinions to choose from. Jokes aside, a Gov monopoly will make money, till the Gov decides to become socialist(hey, weâre making too much money!) instead of a rational investor in the said venture. I fully expect huge protests and backpedalling when fares are rationalised or even platform ticket prices are raised. Thatâs the risk with Gov entities.
Iâve invested in IRCTC for a small sum at 1600 levels.
Do you think company is doing right things to expand business? Can it grow the EPS up to 100 in FY 23,24? If yes, then stock price of 6000 comes to 60 PE multiple, and growth is never cheap because no one know how much of growth can happen.
Thanks Sachin, ur points are valid and i believe this is what the buyers/investors are factoring in currently.
However, given that the Eps for FY17 was 57 & Fy18 55 and the consensus fwd eps(fy22) is also 55-60 , I dont see reasonable margin of safety in assuming eps of 100 for fy23.
indian Railway wants 50 percent share of the convenient fee by the strke of a letter. All our projections are out of the window with this one letter. irctc letter.pdf (619.3 KB)
Disclosure: invested and the views are biased.
Now what ahead, I had this is mind when I heard IRCTC to have other mergers [RAILTAIL, not sure how it will pan out], since a monopoly business the profits will be shared. What will be its affects in long term view say 2-3 years?
Will it shore up valuations for IRCTC or have a negative effect?
Disclosure: invested and the views are/might be biased.
I personally canât believe this, what a shame, what a shameâŚI was under the impression that this government is looking to create investor wealth, gosh, what a shame
Itâs total negative decision for investor. This was not expected after listing, though they have done a similar step in 2016 prior to listing. It will go down as a negative precedent among investor and stock will fall big time coming daysâŚ
Just a day back, posted on government regulation threat and its sad to see it coming so fast to this counter. Being an F&O stock and free from circuit limit, this will bleed the shareholders. A good learning for me though not invested. Any business under regulatory control and majority government ownership should never be brought without enough MoS however good the narratives are. As Charlie Munger puts it
âAll I want to know is where Iâm going to die so Iâll never go there.â
I warned how risky IRCTC share rally was and similarities with Zee⌠A PSU stock will after all remain a PSU stock and there is a reason why most of them trade at a low PE ratio despite paying healthy dividends.
All future earnings are linked with gov control and regulations. Just a kind reminder how near monopoly PSU giant businesses like MTNL, Air India, BSNL etc also managed to go into deep losses very quickly.
Iâd like to know did any of presentations shared here of the brokerage houses that gave detailed analysis promoting itâs investment in IRCTC lay out broad risks involved, like an event liker this? Or were they only pros and good things in there?
Possible erosion of market cap exeeds miniscule revenue gain from such a decisions. Plus tarnish the image of PSUs. Not sure who in right mind could make such a irrational decisions. Seems all motivated for the gain of few big insider people. Will afraid to touch any PSUs no matter how attractive it is in future
This risk was always there as government companies are welfare orientated and shareholders comes secondaryâŚ
Positives here are they might increase convinence fees and every now and then they wonât change it as from now government will be getting a cut of itâŚ
yes, the revenue gain could be hardly 400-500 cr, the market cap loss could be, I dont know how much, but huge from the looks of it, also the multiple assigned to all PSUâs due to this could & should tend to be lowerâŚwho in the right mind could think of such decisions, its unimaginable
Jokes aside, a Gov monopoly will make money, till the Gov decides to become socialist(hey, weâre making too much money!) instead of a rational investor in the said venture. I fully expect huge protests and backpedalling when fares are rationalised or even platform ticket prices are raised. Thatâs the risk with Gov entities.