Railway stock: Nuvama ups share price target for multibagger Titagarh Rail to Rs 949

Multibagger stock Titagarh Rail Systems Ltd climbed 6 per cent in Friday's trade to take its year-to-date gains past 270 per cent after the railways-linked company reported a 46.4 per cent YoY rise in net profit at Rs 70.50 crore for the Septmber quarter. Following the results, the domestic brokerage Nuvama Institutional Equities has upped its share price target for the stock to Rs 949 from Rs 776 earlier.

By 11 am, the scrip was trading 6.33 per cent higher at Rs 845.35. Nuvama's target price suggests a 12.26 per cent potential upside over this price.

Titagarh Rail Systems reported a 54 per cent YoY surge in sales while its Ebitda margins limbed 320 basis points YoY to 12.3 per cent, aided by operating leverage and higher contribution from better margin private sector wagon orders. At the end of September quarter, Titagarh Rail Systems commanded an order book of about Rs 28,200 crore.

"Execution of the wagon order from the Indian Railways is progressing well; the company achieved highest-ever dispatch of 759 wagons in September. Titagarh Rail is benefiting from surging railway capex. We are raising the target P/E to 33 times from 30 times and FY24E and 25 EPS estimates by 5 per cent and 4 per cent, respectively," Nuvama said.

Nuvama said the inorganic route is propelling the growth trajectory for Titagarh Rail Systems and that the railyways-linked company is well entrenched in the wagon segment, having beefed up the business in its near two decade journey.

Nuvama noted that the company acquired Cimmco, an established player in the wagon segment, to capitalise on Indian Railways’ (IR) wagon tendering policy, which favours players with a strong track record.   Similarly, it acquired AFR, the biggest French wagon maker, to bolster its design skills and expanded geographical presence.

"While low wagon orders in the past few years hurt TRS, it remains well placed to benefit from rising demand for custom-made wagons post commissioning of DFC," it said.

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