Indian Railway Catering and Tourism Corporation (IRCTC) has drawn a cautious yet optimistic outlook from research firm Prabhudas Lilladher, which has maintained a BUY rating on the stock with a target price of Rs 850, based on FY27 estimated earnings. Despite a subdued first-quarter performance for FY26, the stock retains its appeal due to robust medium-term growth projections, steady profitability, and promising expansions in business segments.

Cautious Start to FY26 Amid Operational Headwinds

IRCTC reported a modest 3.8% year-on-year revenue growth to Rs 11,597 million for Q1 FY26, falling short of the market expectation of Rs 12,382 million. The catering and Rail Neer divisions witnessed declines of 2.2% and 0.9% respectively, impacted by factors such as absence of election special train business in the base quarter and temporary station upgrade disruptions curtailing license fee income from static units. Rail Neer’s Bilaspur plant’s non-operation further suppressed top-line numbers, compounded by diminished bottling volumes. However, the tourism segment emerged as a bright spot, surging 20.7% YoY to Rs 1,477 million, bolstered by higher demand.

Profit Margins and EBITDA Show Resilience

Though revenue growth disappointed, IRCTC managed a 6% increase in EBITDA to Rs 3,973 million, with EBITDA margin expanding slightly to 34.3% from 33.5% a year ago. This margin resilience was partly supported by cost optimization, as raw material expenses dropped sharply by 31.1% YoY in the quarter. The company achieved a 7.5% rise in profit after tax (PAT) to Rs 3,307 million, with PAT margin improving to 28.5%, surpassing consensus estimates. Depreciation expenses saw a lower run-rate, balancing the impact of subdued top-line growth.

Segmental Performance: A Mixed Bag

Catering revenue declined 2.2% to Rs 5,468 million while EBIT margin softened to 13.1%.

Internet ticketing revenues grew 9% to Rs 3,588 million, with an exceptional EBIT margin of 84.2%, underlining strong digital business profitability.

Tourism segment revenue rose sharply by 20.7% to Rs 1,477 million, with EBIT margin expanding to 8.7%.

Rail Neer revenue edged down 0.9% to Rs 1,105 million, though EBIT margin improved to 13.9%, reflecting operational efficiencies despite lower volumes.

Key Con-call Highlights

Approximately 126 million tickets were booked during Q1 FY26.

UPI payment share stood at 48.7%, reflecting a growing user preference for digital transactions.

Convenience fees contributed two-thirds to internet ticketing revenue versus one-third from non-convenience sources.

Catering services cover around 1,300 trains nationwide.

Planned capacity expansions in Rail Neer include Danapur and Ambernath plants, with additional facilities expected in Prayagraj, Ranchi, Bhagalpur, and Mysore.

Rail Neer daily bottle sales averaged 1.41 million, with blended realizations pressured by introduction of smaller 500 ml bottles on Vande Bharat trains.

IRCTC received in-principle RBI approval for a payment aggregation license, with final approval expected in 12-18 months.

Rail Neer plant utilization was 87.4% in Q1 FY26, slightly up from 86.8% YoY.

Financial Outlook and Revised Estimates

In light of the weak Q1 showing, Prabhudas Lilladher has trimmed revenue estimates by approximately 4% for FY26 and FY27, while EPS forecasts remain broadly intact after adjusting depreciation estimates related to capitalization of a new office building (land cost Rs 3,665 million). The firm projects a revenue CAGR of 8% and PAT CAGR of 10% over FY25–27. Key financial figures are reflected below:

Valuation and Price Targets

At the current market price of Rs 725, IRCTC trades at a price-to-earnings (P/E) multiple of approximately 40.3x on FY26 earnings and 37.5x on FY27 estimates. The report retains its target multiple of 44x FY27E EPS, setting a fair value price target of Rs 850, implying upside potential of nearly 17% from current levels. The firm anticipates stable dividend yields around 1.1-1.2%, supported by consistent earnings growth and strong free cash flows.

Key Investment Levels and Risk Considerations

Support Level: Rs 700-710 zone, where the stock has strong historical demand.

Resistance Level: Rs 830-850 target range, near the report’s price objective.

Catalysts: Expansion in payment aggregation business post RBI license, capacity ramp-up in Rail Neer plants, and sustained digital ticketing growth.

Risks: Further moderation in catering revenues due to operational disruptions, pressure on Rail Neer realizations, and delays in regulatory approvals.

Bottomline: Steady Growth Amidst Short-Term Headwinds

Despite a cautious start to FY26 with some revenue pressures, IRCTC’s diverse business model and robust margins underpin a positive medium-term growth trajectory. The strong digital footprint in internet ticketing, strategic expansions in Rail Neer, and growing tourism segment provide multiple earnings drivers. Prabhudas Lilladher’s BUY rating with a Rs 850 target invites investors to capitalize on a fundamentally sound stock poised for an 8-10% CAGR in earnings over the next two years—combining steady income, capital appreciation, and an evolving payment ecosystem offering fresh growth levers.