Why IRCTC shares lag behind RVNL, IRFC, other railway stocks – Explained

According to stock market experts, other railway shares like RVNL, IRCON International OR IRFC are available at attractive valuations while IRCTC share price is available at higher valuations. Apart from this other railway stocks are infra stocks while IRCTC is a tech stock which has almost monopoly in online railway ticket booking business. He said that after the demand for online railway tickets, announcement of new trains etc. starts, the valuation of IRCTC shares may increase. He said that the government of India selling its stake in IRCTC is also a major reason for the sluggishness of stock trading in the last one year.

IRCTC Vs RVNL Vs IRCON Vs IRFC Vs Other Railway Stocks

Speaking about the fall in IRCTC share prices despite rally in other railway stocks, Rajesh Sinha, Senior Research Analyst, Bonanza Portfolio said, “In the recent few trading sessions, we have seen a strong rally in all railway stocks , but IRCTC lags behind. One of the reasons behind IRCTC’s lag could be its promoters, which the Government of India has been steadily disinvesting its stake in. The government has reduced its stake from 87.4% in September 2019 to ~25% currently. Disinvested up to 62.4%. The government has raised concerns among investors about its future outlook. The continuing decline in EBITDA margin could be another trigger for the company to lag.”

High valuation of IRCTC shares

Bonanza Portfolio further said, “Another reason behind IRCTC share price not performing as other railway stocks is its expensive valuation. IRCTC is currently trading at PE ratio of 51.5x, its TTM EPS is Rs 11.80 It is considered expensive even for a good stock, so any long-term investor may refrain from buying the stock.”

Advising stock market investors to understand the difference between the business model of IRCTC and other railway sector stocks, Avinash Gorakshkar, Head of Research, Profitmart Securities, said, “IRCTC is primarily a tech company with an interest in online railway ticket booking business. is a monopoly. Its main revenue comes from online railway ticket booking business. However, it is also expanding into hospitality and other allied sectors.”

Shopping in railway shares today

Advising positional investors to look at RVNL and IRFC ahead of IRTC stocks, senior technical analyst Parvesh Gaur, Swastik Investmart said, “IRCON share price structure has become very attractive as it has seen breakout of triangle formation on daily chart with strong volume. It is also forming higher highs and higher lows. A set of moving averages have formed a made a base 55-56 levels, which makes the counter attractive on a short- to long-term basis. Upwards, 70 serves as the most sensitive levels; Above this, we can expect a long move towards the Rs. 76 in the short to long time frame, while in the downtrend, 60 serves as an important support during any correction.”

Giving Buy tag to RVNL shares, Pravesh Gaur said, “RVNL share price has given a major breakout of a triangle formation with strong volumes on the daily chart. It costs around Rs. But trend-line resistance was encountered. 75, but in the last 2 trading sessions, the stock has broken these levels and moved towards a new all-time high. On the contrary, Rs. 100 is facing the susceptible area; Above this, one can expect a level of Rs. 110 in the extended time frame. On the downside, Rs. 85 will be an important support level.”

Avinash Gorakhkar said that other railway companies are infra companies while IRFC is a financial company. Hence, these companies are reaping the benefits of the Government of India’s focus on the infrastructure sector, while IRCTC awaits its full operationalization of the Indian Railways.

Rajesh Singh of Bonanza Portfolio recommends long-term investors to buy IRCTC shares, saying, “IRCTC’s long-term outlook looks promising as the demand for setting up railway lines is increasing. It is also taking strategic initiatives, such as a Starting special trains and expanding its ticketing services including online booking for helicopter service to Kedarnath Dham. It may also benefit from increased license income in catering as it returns to pre-Covid-19 levels. Travel and beginning of new vande bharat trains. On top of the tailwinds, coupled with rising revenue from advertising and license fees, will drive IRCTC’s long-term profitability.”

Disclaimer: The views and recommendations given above are those of individual analysts or broking companies and not of Mint. We advise investors to do due diligence with certified experts before making any investment decision.