1 Railway Stock Zooms 1,213% In 5 Years, Rs 1 Lakh Investment Rises By Rs 12 Lakh; More Steam To Buy?

Leading railway rolling stock manufacturer, Titagarh Rail Systems' 2023 included an impresssive upside with triple-digit returns to investors in a span of 12 months. But Titagarh Rail's engine has been bolstering for the past 5 years with gains of nearly 1,213%. Investors who bought the shares for Rs 1 lakh have garnered more than Rs 12 lakh on their investment. Titagarh Rail's share price still has more steam for growth even in 2024.

On the last day of 2023, aka December 31, Titagarh Rail's share jumped by 2.34% to end at Rs 1,043.15 apiece with a market cap of Rs 14,048.49 crore. The was closer to its 52-week high of Rs 1,090.30 apiece.

In 2023, this railway stock's growth has been huge to the tune of 359.44%. While in 5-years, the stock has witnessed a humungous 1,212.96% surge on BSE. This stock is definitely among the top performers in the railway segment.

Should you buy Titagarh Rail Systems?

In its latest research note, Antique Stock Broking said, "While TRSL is India's undisputed leader in the wagon manufacturing space, now it is also among India's very few integrated manufacturers of passenger rail systems. We believe that the company has created a manufacturing setup, which is difficult to replicate, and has the capacity to grow its turnover to over INR 90-100 bn over the next five years."

Titagarh Rail is India's largest wagon manufacturer and has transformed itself into a complete railway transportation company, with a successful entry into the passenger transport sector.

The brokerage highlighted that the company is augmenting its coach manufacturing capacity by 3x from 240 coaches a year to 840 coaches a year over the next two years. It added, "We believe that the PRS segment, along with propulsion system, can have a the potential of Rs 90 bn on full utilization."

Furthermore, given the growing share of railways in transport logistics, demand from the private sector and exports, the brokerage said, "We believe that wagon demand in the country will grow at an average of 30,000 units per year. TRSL has the most competitive structure, which will help it maintain a market share of ~30%."

Also, the brokerage believes that Titagarh Rail will be among India's very few private-sector integrated coach manufacturing companies.

Coming to the joint venture with RK Forgings, the brokerage said, "India does not have the meaningful capacity to manufacture forged wheels and depends on imports, and TRSL will benefit from India Railway's indigenization drive."

In the JV, Titagarh Rail will have up to 50% stake. Through the JV, the duo will supply Indian Railways 1.54 mn forged wheelsets over 20 years (80,000 wheels per annum from the 3rd year), and the JV is setting up a wheel plant with a capacity of 200,000 wheels per year. The company is expected to contribute about $2 billion in the JV's equity.

Lastly. on the valuation, Antique's note said, "We expect TRSL to post earnings CAGR of 62% over FY23-26E, and generate an average RoE of +25%. TRSL has successfully raised Rs 7 bn recently for capex and working capital requirements. TRSL's stock has meaningfully appreciated in the past year, led by a nearly doubling of profit in FY23. Yet, at 29x FY25E earnings, the stock is reasonably valued w.r.t. other industrial
companies and does not capture TRSL's long-term growth potential. We maintain a BUY rating on the stock with a revised target price of Rs 1,252, based on 25x FY26E earnings."

This would imply a potential upside of 20% in Titagarh's share in the near term.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.