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ICICI Securities Report
Railtel Corporation of India Ltd. Q1 FY25 net profit grew 27% YoY to Rs 487 million which is within the company's guidance of growth of 25–30%. Railtel expects telecom revenue to grow 9–10% while projects' revenue is anticipated at Rs 20 billion driving total revenue growth of 25-30% in FY25E.
Considering the project business' Ebit margins are only 5–6%, achieving guided stable margin for FY25 can be challenging arithmetically. Railtel hopes for an acceleration in its order book driven by the large capex planned by Indian Railway; it plans to bid for Kavach implementation immediately.
We raise our earning per share estimates by ~3% for FY25–26E on lower depreciation cost.
Our target price is revised higher to Rs 315 (from Rs 240), valuing the stock at a FY26E price to earning multiple of 25 times (earlier 20 times).
This implies enterprise value/Ebitda multiple of 14 times for FY26E. Maintain 'Sell'. Aggressive bidding in railway projects could be a potential downside risk.
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