RailTel shares stare at 22% downside! What ICICI Sec says on this railway stock

RailTel Corporation of India's order book inflow remained healthy, but its project segment margins are low and volatile, ICICI Securities said on Monday, as it retained its 'Sell' rating on the stock. Even as the brokerage upped its target price for the railway stock to Rs 290 from Rs 255, the fresh target hinted at a 22 per cent downside over the prevailing price. Higher-than-expected revenue and margin from Indian Railways’ LTE and Kavach projects; and consistently higher growth in telecom revenue, are a couple of risks to ICICI Securities' 'Sell' call.

On Monday, the RailTel stock was trading at Rs 370.20 apiece on BSE. ICICI Securities target suggests 21.66 per cent potential downside ahead for BEML.

RailTel's Q2FY26 net profit grew 4.7 per cent YoY, and its revenue growth was driven by the projects business, which tends to drive slower profits. Telecom services’ revenue grew 8.7 per cent YoY, showing some improvement in its trajectory. RailTel is hopeful of 30–40 per cent growth in the data centre business; thus, helping telecom services’ revenues.

"Projects business’ outlook is strong, with a 57 per cent rise in its order book (OB). Also, there is huge opportunity in this avenue from railways’ investment in Kavach and captive network instalment. RailTel maintained its revenue growth guidance of 25 per cent for FY26 and stable margins at 11–12 per cent. We raise our FY26–27E EPS by 6–12 per cent and target to Rs 290 (vs. Rs 255) at an unchanged P/E multiple of 20x but roll over valuations to Sep’27E," ICICI Securities said.

RailTel has signed an MoU with Quadrant Future Tek Ltd for the implementation of technology on Kavach (anti-collision avoidance system), which is developed by Quadrant. Quadrant’s Kavach technology is now established; which has helped RailTel participate in Kavach, ICICI Securities said.

RailTel has won two Kavach contracts with a combined OB of Rs 500 crore, covering over 1k kms of railway line. The execution of these orders is expected to start from Q3FY26 and will likely be executed by FY28. Nonetheless, it expects to recognise a significant portion of the revenue from these orders in FY27.

BEML expects data center’s revenues to grow comfortably at 15–20 per cent in FY26. It is building a data centre at Noida with initial capacity of 5MW, and over two years shall expand to 10MW. RailTel has completed tendering for the first phase of an edge data centre, where the company plans to rollout 102 edge data centres. The tender is won by Techno Electric & Engineering Company. RailTel expects to commission 4–5 edge data centres in FY26. The company has commissioned one edge DC in Gurgaon, and one is under progress in Mumbai," ICICI Securities said.