Target: ₹352

CMP: ₹287.30

In the second quarter of the fiscal year 2023-24, RailTel Corporation of India Ltd. (RAILTEL) reported strong financial performance. Revenue from Operations grew to ₹599.10 crore, up 40 per cent y-o-y and 28 per cent q-o-q, driven by segment growth in the railway and data center services.

EBITDA stood at ₹115.30 crore, up 15 per cent y-o-y and 55 per cent q-o-q. EBITDA margins improved to 19.3 per cent q-o-q up 338 bps but decreased 417 bps. EBITDA margins are set to strengthen in the upcoming quarters due to increased revenue growth and the

benefit of operating leverage. Meanwhile, it’s expected that the Profit After Tax (PAT) will maintain a steady rate of 9-10 per cent. The reported PAT stood at ₹68.10 crore, showing a noteworthy 23.4 per cent y-o-y increase and a substantial 77.5 per cent increase when compared to the previous quarter, indicating a noticeable enhancement in profitability.

We revise a ‘Buy’ rating for Railtel, setting a target price of ₹352 with a P/E of 32.6x using forecasted EPS of ₹10.8 (FY25). The factors contributing to this recommendation encompass the projects & data center service segment growth momentum, a robust order book, and the enhancement of profit margins, all of which combine to bolster overall profitability.