Titagarh Rail Systems shares delivered multibagger returns this year; where is the stock headed?

Shares of multibagger Titagarh Rail Systems Ltd have delivered 228% returns this year. Titagarh Rail Systems stock, which closed at Rs 223.45 on December 30, 2022 was trading at Rs 745.80 in the afternoon session today. Apart from the stellar returns this year, the stock has clocked 368% returns in a year and zoomed 651% in two years.  However, the stock has lost 9.25% or Rs 76 in a week amid a weak sentiment in the equity indices during the period. The Indian stock market has been falling for the last five sessions.  

 In the currents session too, shares of Titagarh Rail Systems slipped 2.94% to Rs 746.35 against the previous close of Rs 768.95 on BSE. Total 1.87 lakh shares of the firm changed hands amounting to a turnover of Rs 14.16 crore. Market cap of the firm fell to Rs 9,491 crore.   

The stock hit a 52-week low of Rs 148.30 on November 2, 2022 and a 52-week high of Rs 867 on October 18, 2023.   

Here’s a look at what brokerages said on the outlook of the stock post Q2 earnings. 

Nuvama Institutional Equities has raised its share price target to Rs 949 from Rs 776 earlier. 

"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 railways linked company is well entrenched in the wagon segment, having beefed up the business in its near two decade journey. 

HSBC Global Research has raised its target price of Titagarh Rail Systems to Rs 970 as the order backlog shows strong visibility to the growth outlook. "Q2 results improve our confidence in Titagarh’s execution capabilities," the brokerage said. 

As the largest wagon manufacturer and an emerging leader in passenger coaches, Titagarh Rail is benefiting from the government’s thrust to put more freight onto rails as well as the modernisation of passenger rail transportation, said HSBC. 

Revenue climbed 54% year-on-year, led by 70% growth in the freight rail systems segment, while passenger rail systems growth was soft at plus 7%, HSBC said. 

“Revenue climbed 3% quarter-on-quarter which was in line with our expectation. Profitability was impressive, with the Ebitda margin coming in at 13.5% (up 320 basis points y-o-y, 60 basis points q-o-q)," the note said. Although strong profitability was expected, given high wagon shipments from the private market, it said.  

"We maintain our FY24-26 revenue forecasts but raise FY24e EPS by 13% and FY25e-26e EPS by 4-6%. With a significant jump in profit in FY25e (75%), we expect profit to grow at a 30% CAGR over the next two years, with an average ROIC of 23% over FY24e-26e," HSBC said. 

Titagarh Rail Systems reported a 46.5% rise in net profit at Rs 70.6 crore in Q2 against a net profit of Rs 48.2 crore. Total revenue climbed 54.1% to Rs 935.5 crore in Q2 against Rs 607.1 crore in the corresponding period of the preceding fiscal. Earnings per share climbed to Rs 5.56 in the September 2023 quarter against Rs 3 in the September 2022 quarter. 

Profit before tax zoomed 112% to Rs 94.39 crore in the last quarter against Rs 44.45 crore in the September 2022 quarter. 

In terms of technicals, the relative strength index (RSI) of the stock stands at 48.6, signaling it's trading neither in the overbought nor in the oversold zone. Titagarh Rail Systems shares are trading lower than the 5 day, 10 day, 20 day, 30 day, 50 day but higher than the 100 day, 150 day and 200 day moving averages.        

Nine promoters held 44.97 per cent stake in the firm and 191901 public shareholders owned 55.03 per cent or 6.99 crore shares as on September 30, 2023. Of these, 1.86 lakh resident individuals held 2.72 crore shares or 21.40% stake with capital up to Rs 2 lakh. Only nine resident individuals with 1.88% stake held capital above Rs 2 lakh at the end of September  2023 quarter.       

About the Company        

Titagarh Rail Systems is engaged in the manufacturing and selling of freight wagons, passenger coaches, metro trains, train electricals, steel castings, specialised equipment and bridges, and ships. The company operates through three segments: freight rolling stock, passenger rolling stock, and shipbuilding, bridges & defence.      

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.

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