This railway stock sees 26% target price cut; still worth a look?

Inadequate wheelset availability and falling order book dragged quarterly earnings of Texmaco Rail & Engineering Ltd, with its wagon dispatches for the December quarter falling to 2,027 wagons compared with 2,334 wagons in the September quarter. Nuvama Institutional Equities cut its share price target on the stock by 26 per cent to Rs 147 from Rs 199 earlier but maintained its ‘Buy’ rating, despite a 17 per cent decline in 2026 so far.

Texmaco ended the December quarter with an order book of Rs 5,700 crore, which was 1.3 times book-to-bill ratio. It won orders worth Rs 300 crore for the third quarter. "Inadequate wagon ordering from Indian Railways (IR) is hurting top line, profitability adversely and compels us to trim FY26, 27/28E EPS by 28 per cent, 15 per cent and 14 per cent and PE multiple from 30 times to 25 times. Maintain ‘Buy’ with a revised target of Rs 147 (Rs 199 earlier) based on 25 times Q3FY28E EPS," it said.

At 2.35 pm, the stock traded 2.19 per cent lower at Rs 113.90. The scrip trades at around 20.3 times FY27 estimated earnings per share.

Nuvama said muted wagon ordering from Indian Railways at about 2,000 wagons ordered in FY26 compared with 9,400 wagons in FY25 and 24,900 wagons in FY24 has led to a reduction in the wagon order book for wagon manufacturers. Texmaco’s wagon order book has also fallen to Rs 2,140 crore against Rs 3,300 crore at end-FY25.

"Nevertheless, the company has tried to make up for this by targeting the private/export wagon space where it has won certain orders. Moreover, it has won multiple orders in the Bright Power division, which has boosted the segment’s order book to Rs 1800 crore (book-to-bill of 3.3 times)," Nuvama said.

In the recent Union Budget, the allocation for rolling stock for FY27E was up 11 per cent YoY; if Indian Railways' plan to procure 32,000 wagons in FY27E materialises, it shall be a significant positive for the company, Nuvama said.