Multibagger railway stock zoomed 394% from 52-week low; time to buy, sell or hold?

Shares of multibagger Titagarh Rail Systems Ltd hit their all-time high today. With today’s rally, the stock has zoomed 394% from its 52-week low of Rs 120.25 hit on August 4 last year. The shares of the railway wagon manufacturer touched an all-time high of Rs 594.80, rising 9.95% on BSE today. However, HSBC Global Research sees more upside to the stock. It has initiated coverage on the railway stock with a buy call with a target price of Rs 730.   

The brokerage expects earnings per share (EPS) to more than double over the next three years with a high-teens return on equity.  

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“We forecast a 2.5 times jump in profit over FY23-26 expected, with an average ROE of 18%, and a more diversified business. We value the company using a one-year forward target PE multiple of 30 times which we apply to our FY26eEPS estimate and discount back to June 2023 to arrive at our target price of  Rs 730 with a 34% upside,” said the brokerage.  

Referring to the risk to the upside, HSBC Global Research said, “Significant dependence on one government-owned entity (Indian Railways) and slower-than-expected execution ramp up of its order backlog.” 

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Vaishali Parekh, Vice President - Technical Research, Prabhudas Lilladher said, “The stock has picked up quite decently in the last 3-4 sessions and currently indicating a breakout above Rs 530 levels has further strengthened the trend with next target of Rs 570-590 levels. The near-term support can be maintained near Rs 505-510 levels and now with overall bias maintained strong can expect for further gains.” 

Arihant Capital Markets expects the stock to rise to Rs 686 in a year.  

The brokerage said, “Titagarh Rail Systems has a strong order book of Rs 275.5 bn (9.9x of FY23 revenue), well positioned to benefit from freight wagons, Vandhe Bharat Trains, Metros, and global wagon tenders, Italy's business net profitability is expected in FY24, Capacity expansion, backward integration, New orders for Vandhe Bharat Trains and Wheelsets will drive business growth going forward. Our initial price objective of Rs 495 has been achieved. However, in a Bull Case Scenario, We maintain our “BUY” rating and valued the stock at 20x of its FY25E EPS, and arrived at a price objective of Rs 686.”  

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Antique Stock Broking has initiated coverage on the stock with a “buy” call. The brokerage has fixed a target of Rs 694 based on 20 times its FY25 earnings.  

Titagarh Rail Systems, a leader in the wagon manufacturing space, now is also among India's few integrated manufacturers of passenger rail systems, the brokerage firm said. The company has created a manufacturing setup which is difficult to replicate and has the capacity to grow its turnover to over Rs 9,000-10,000 crore over the next five years, it said   

“We expect TRSL (Titagarh Rail Systems) to post earnings CAGR (compounded annual growth rate) of 53 percent over FY23-26, and generate an average RoE (Return on Equity) of over 25 percent,” it said.   

Titagarh Rail Systems plans to invest Rs 600 crore over the next three years and recently proposed raising of Rs 289 crore by selling shares to a large investor. This, along with strong cash flow expected in the future, would help the wagon maker meet its growth goals, the brokerage said.   

In the last one year, the Titagarh Rail Systems stock has surged 351%. The stock has remained a multibagger in the last three years too. It has rallied a strong 1262% during the period.  

In the current session, total 1.90 lakh shares of the firm changed hands amounting to a turnover of Rs 10.98 crore. Market cap of the firm rose to Rs 6,993 crore.    

In terms of technicals, the relative strength index (RSI) of the stock stands at 74.2, signaling it's trading in the overbought zone. Titagarh Rail Systems shares have a beta of 0.8, indicating very low volatility in a year. Titagarh Rail Systems shares stand higher than the 5 day, 20 day, 50 day, 100 day and 200 day moving averages.    

Nine promoters held 47.83 per cent stake in the firm and 107836 public shareholders owned 52.17 per cent or 6.23 crore shares for the quarter ended March 2023. Of these, 1.04 lakh public shareholders held 2.77 crore shares or 23.17% stake with capital up to Rs 2 lakh. Only 16 shareholders with 5.07% stake held capital above Rs 2 lakh for the quarter ended March 2023.   

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.   

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