**IRCTC – **

Q1 FY 25 concall and results highlights –

Revenues – 1120 vs 1002 cr
EBITDA – 375 vs 343 cr, up 9.3 pc YoY ( margins @ 33 vs 34 pc )
PAT – 308 vs 232 cr ( LY had an exceptional loss of 52 cr in Q1 )

Cash and Cash Equivalents @ 2908 cr

Quarterly breakdown of revenues –

Internet Ticketing – 329 cr, up 14 pc YoY ( through own website and mobile app ). www.irctc.co.in is the most transacted website across Asia – Pacific region ( > 3.5 cr transactions / month ). Has a dominant mkt share of 84 pc in reserved rail tickets. Segmental EBITDA margins @ 82.76 pc

Catering – 559 cr, up 17 pc YoY ( includes mobile catering services through onboard Pantry and static catering services at Jan Aahar, Cell Kitchens, food courts ). Segmental EBITDA margins @ 13.94 vs 14.61 pc YoY

Travel and Tourism – 124 cr, down 12 pc YoY ( offer domestic and international tour packages, car rentals, air ticketing, educational tours, cruise packages ). De-growth in the segment is primarily attributed to temporary cessation of operations of State Teertha trains and Bharat Gaurav trains in Q1 due general elections

Packaged drinking water – 107 cr, up 17 pc YoY ( have 15 operational plants across India. All are fully automated with zero manual interventions ). Segmental EBITDA @ 12.65 pc vs 13.17 pc YoY

Out of total caring revenues, 12 pc came from Vande Bharat trains. Railways are introducing more Vande Bharat + other premium trains. These trains provide them better revenues in the catering segment

At present, total number of trains that IRCTC ( their total addressed mkt ) is 1259 trains. IRCTC doesn’t cater to short distance trains

Out of 329 cr earned through ticketing breakdown of convenience fee and non-convenience fee @ 224 cr ( vs 198 cr ) and 105 cr ( vs 92 cr )

Number of tickets sold in Q1 FY 25 @ 11.81 cr vs 10.43 cr ( in Q1 FY 24 )

Capacity utilisation of Rail Neer business stood @ 86 pc. Q1 was very good for Rail Neer business aided by harsh summers. Company’s total capacity to produce bottled drinking water is 17.68 lakh bottles / day. In Q1, company produced an avg of 14 lakh bottles / day. Company is in the process of commissioning another plant with capacity of 0.72 lakh bottles / day @ Vijaywada by Oct 24

For the catering business, company’s EBITDA margins generally fluctuate between 12-15 pc depending on the mix of trains being catered

Company aims to grow its revenues @ > 15 pc and PAT @ > 20 pc for FY 25 vs FY 24

Company has also ventured into E-Catering business where they have aggregators like Zomato, Swiggy and others on their platform. This business grew by 35 pc YoY in Q1

The last price hike taken by the company in the catering business was in 2019. Price hikes have to be approved by the railway board – ministry of railways. ( this can be a potential positive trigger – as and when it materialises )

The breakdown of 1259 trains that the company is catering to is as follows – 117 pre-paid trains ( like Shatabdi, Rajdhani, Vande Bharat etc ), 440 mail express with pantry and 702 mail express where they run PSP

No plans of increasing the price of Rail Neer bottles – basically to keep competition away ( it’s priced @ Rs 15/lit vs Rs 20/lit for most other brands ). They want to improve their efficiencies, capacity utilisation to further improve the margins in this segment

Disc: not holding, not SEBI registered. May buy if the stock price corrects from hereon

Few Stats:

America Banking penetration: Stands at 92% as of 2022
India Banking penetration expected to reach 50% by 2025

Median P/B of American banks 1.5 to 2
Current KMB P/B ratio: 2.7 (Historical median 4.1)

Banking is a boring business as it should be, the only surprise we get will be on the negative side. Doing the same old boring things day in and day out is what matters here, being conservative is synonym with past KMB

Now the investors has to ask few question to themselves in this counter, Is there a runway for growth ?
Can we trust the competence of the management (ROE Track record)

As to RBI Ban concerns, it is highly unlikely the management will be complacent especially after the PayTM crackdown.

Of all the banking institutions out there, KMB has more intrinsic value compared others due to having various successful subsidiaries, that currently hold enterprise discount.

What should the investors’ expectation be, can the bank grow beyond 15% cagr for next 10 years, the answer seems to be likely yes

is this better than other investment asset class, gold, real estate, silver, equity , debt, etc., , answer seems to again likely yes

Even at this level, even if the P/B derates the investors should still obtain 15-20%cagr over the years to come possibly decades to come.

And that should be enough for most people, having a drawdown or consolidating for 5 years is frustrating for the investors, after all we all are human beings, however, such is the nature of the market, all we can do is asses is there is major structural risk is there to this investment if not, you should hold on to it and pass it on to the next generation.

In my opinion, if that’s worth anything, we are having a bargain here that;s all I can say, just accumulate as much as you want and hold on to it , I think it’s undervalued not because of the historical PB multiple, rather it’s because of the management of the company and it’s runway of growth.
And one should actually talk to your friends and family who work in PSBs now and what’s the current situation at the branch level (regarding growth and NPA). If not now, in the next 2 or 3 quarters when the NPA cycle turns, one should be seeing and start reaping the benefit of staying patient at this counter. (Unpaid Credit card loans are at 1.8 lakh crore as of this moment, how much do you think will other bank’s share vs KMB ? ) also KMB is in/direct play on affluent India

(PS: ITC cagr is 18% over 30 years, yet it consolidated for 8 years, at least it had its own inherent risk such as the cigarette ban)

Boring is good in finance industry, patience and temperament will be rewarded