scorecardThis railway stock has turned a multibagger as its order book expands
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This railway stock has turned a multibagger as its order book expands

This railway stock has turned a multibagger as its order book expands
Stock Market5 min read
  • The stock of Rail Vikas Nigam has surged 42% in the last five sessions, and has been on an upswing for the last six months.
  • On April 26, the stock hit its 52-week high at ₹114.70.
  • There are also reports of Indian Railways taking up the production of 120 advanced Vande Bharat Express trains by August 2023.
Rail Vikas Nigam Limited (RVNL), a public-sector railway company, has been on investors’ radar recently because of a strong rally in the stock led by robust orders. The stock has surged 42% in the last five sessions and 59% in the last one month. It has risen 156% in the last six months.

In fact, on April 26, the stock hit its 52-week high at ₹114.70.

The interest in the stock is due to the series of orders it has bagged in the last few months. As per media reports, a consortium of RVNL and Russia's CJSC Transmashholding became the lowest bidder for a mega order to manufacture and maintain 200 trainsets of Vande Bharat.

Earlier this month, RVNL also emerged as the lowest bidder for a Mumbai Metropolitan Region Development Authority (MMRDA) project worth ₹378 crore.
Month

Orders won

Order value

March

Construction of 6-lane Greenfield Varanasi-Ranchi-Kolkata Highway in consortium with Tracks & Towers Infratech

₹1,271 crore

March

Manufacturing-cum-maintenance of Vande Bharat Express trains

200 trainsets and cost per set is ₹120 crore

March

Construction of Six-Lane Elevated Kona Expressway

₹720 crore

April

Lowest bidder for provision of E1-based Automatic Signaling in stations between Jhansi - Gwalior

₹121 crore

April

Mumbai Metro line

₹378 crore


Reinventing itself
Rail Vikas Nigam executes all types of railway projects including new lines, gauge conversion, railway electrification, metro projects, workshops, major bridges, construction of cable-stayed bridges, and institutional buildings.

“After being a railway capex arm for almost 20 years, RVNL is reinventing itself and is embarking on a new journey (open bidding vs nomination). With extensive expertise and experience, we think it will be difficult to replace RVNL for railway projects while it wins new opportunities in new sectors and geographies,” said a report by Elara Capital.

It works on a turnkey basis and undertakes the full cycle of project development from conceptualisation to commissioning, including stages of design, preparation of estimates, calling contracts, and project and contract management. The public- sector player has also incorporated a subsidiary named Kinet Railway Solutions.

Rail Vikas Nigam

FY21

FY22

FY23 estimated

Sales

₹15,403 crore

₹19,381 crore

₹20,020 crore

Other income

₹807 crore

₹903 crore

₹1,001 crore

Net profit

₹991 crore

₹1,182 crore

₹1,298 crore

Source: Asit C. Mehta Institutional Research

Vande Bharat programme an upside trigger for RVNL
There seem to be more orders on the way for the company, as media reports suggest that the Indian Railways will start the production of 120 advanced Vande Bharat Express trains by August 2023.

The central government has sanctioned ₹600 crore to set up a coach factory at Latur and to begin the operations at the earliest. Presently, 14 Vande Bharat Express trains are operating on different routes across the country.

In the 2023-24 budget, the government increased its capex by 33.4% to ₹10 Lakh crore for infrastructure development, with record allocation to the Railways.

“100 transport infrastructure projects identified for end-to-end connectivity for ports, coal, steel and fertiliser sectors. It’s the highest-ever capital allocation for Railways and is nearly nine times over FY14 allocations with an outlay of ₹2.4 lakh crore provided for railways in FY24,” said a report by Asit C Mehta Investment Intermediates titled ‘Accelerating growth prospects’.

As more orders are set to roll in, brokerages expect RVNL’s revenue and margins to improve as well. “Management expects margins to gradually improve as the share of nomination-based bidding comes off (cost + fixed margin). For FY23, management targets a revenue of ₹200-205 billion,” said the Elara report.

Analysts at Asit C Mehta said they expected the company’s revenue to grow at a compound annual growth rate (CAGR) of almost 20% over FY23-FY26.

“RVNL’s expertise and experience in diversified infrastructure projects - from rails, roads, marine, hill areas, metro trains and many other areas, with (an) existing strong order book, we believe RVNL is well placed to capitalise on these opportunities,” said Asit C Mehta.

The brokerage has a ‘Buy’ rating on the RVNL stock with a target price of ₹120, indicating that there is more juice left in it even after turning a multibagger.

$RVNL.NSE Strong Reasons to buy this Stock:> Big Elephant Candle closed above 100> Any Dip at 100 is a Buy> High Dilevery Volume> Daily RSI above 60Buy At 100 Stop loss 80Target 150Risk to Reward 1:2.5R

— (@nifty_alchemist) April 26, 2023]]>

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