RailTel shares: Railway stock tanks 4%; ICICI Securities sees further downside

Shares of RailTel Corporation of India Ltd tanked 4 per cent in Tuesday's trade amid a broader weakness in the market. But if were to go by ICICI Securities, the stock stares at further downside potential. The domestic brokerage has suggested a 'Sell' on RailTel with a revised target of Rs 270 from Rs 280 earlier. 

On Friday, the PSU stock fell 3.6 per cent to hit a low of Rs 310.65. The ICICI Securities' target suggests a 13 per cent downside for RailTel over the prevailing market price. 

Post its Q4 results, RailTel has guided for revenue growth of 25-30 per cent in FY26 and EBIT margin of 11-12 per cent. Revenue growth for the Navaratna PSU is seen significantly higher in the 'Projects' segment. Railtel is expecting order inflow of Rs 4,000 crore in FY26 and is aiming to drive faster revenue in telecom services and pick up in data centre business. 

ICICI Securities, however, is unimpressed. The brokerage said while the RailTel's Q4 net profit grew 46.3 per cent YoY, in general, it exhibits lumpiness. 

"Railtel delivered profit growth of 27.6 per cent in FY25, in line with the guidance of 25–30 per cent. The company has reiterated its guidance of revenue/profit growth of 25–30 per cent for FY26 on strong order book (OB) addition of Rs 3,150 crore in FY25; however, telecom revenue run-rate is slower than expected," the brokerage said. 

It added that Railtel sees its Projects business’ EBIT margin at 4–5 per cent and consolidated margin at 11–12 per cent, which are slightly lower than expected. 

"We cut our FY26–27E EPS by 3–4 per cent on slower telecom services revenue and lower projects EBIT margin; target price lowered to Rs 270 (from Rs 280) with a P/E multiple to 20 times FY27E (unchanged). Retain SELL," it said.

ICICI Securities said the Quadrant’s Kavach technology is now established, which has helped Railtel participate in Kavach. The first Rs 244 crore Kavach contract has been won, and the execution is likely from Q3FY26. 

"Kavach execution is also dependent on approval of Version 4.0 products where no player has yet received approval. RailTel does not anticipate any hardware bottleneck for its Kavach equipment, as Quadrant has an exclusive supply agreement with Railtel. It appears Railway has delayed the implementation of LTE network, as they are evaluating the deployment of 5G on the 700MHz spectrum band. Immediately, Railway would be using UHF technology for running Kavach system," the brokerge said.

Railtel said it is very close to commissioning two edge data centre and is likely to commission 7–8 edge data centres in FY26. Total revenue expected is Rs 10 crore from the data centre segment and Railtel would make this part of it, as the remaining revenue shall be shared to partner who has put capex to set-up data centres. 

Railtel is marketing the data centre, and implementing network connectivity and security layer, ICICI Securities noted.