RVNL shares: Axis Securities gives 'Buy' call; expects Budget to provide more allocation to railways

Brokerage Axis Securities assigned a 'Buy' rating on Rail Vikas Nigam Ltd (RVNL) shares with a target price of Rs 501, implying an upside of 5.15 per cent with a duration of three to six months from today's closing price of Rs 476.45. The stock extended its upmove for the fourth consecutive session on Friday by gaining 9.01 per cent.

The broking firm said, "Higher capex outlay in the Union Budget 2024-25 for railways has created significant growth opportunities for the company across its business verticals. We expect the upcoming Budget to provide more allocation to railways that will boost its future growth prospect."

"The company expects EBITDA margins to improve owing to addition of variable-priced projects to the order book portfolio offering better margins. With pick up in execution in H2FY25 we expect the margins to be around 6% in FY25-26E," Axis Sec also stated.

It mentioned that RVNL's robust order book would drive revenue growth. "As of June 30, 2024, the company's order book stood at Rs 83,221 crore, across various segments like Railway EPC, Coach production & Electrification works. This gives revenue visibility for the next 3-4 years. With its established track record of execution, the company is positioned for steady revenue growth, projecting an 8 per cent CAGR over the period from FY23 to FY26E," the brokerage stated.

"The company maintains a robust order book, supported by a clean balance sheet, strong return ratios and a healthy dividend payout. We recommend a BUY rating on the stock with a TP of Rs 501/share," Axis Sec added.

Separately, the state-run firm informed exchanges that it has removed joint venture (JV) Dighi Roha Rail Ltd from the register of companies (RoC). RVNL is an executing arm of Indian Railways and works for and on behalf of the ministry to execute projects assigned to it. It works on a turnkey basis and undertakes the full cycle of project development from conceptualisation to commissioning including stages of design, preparation of estimates, calling and award of contracts, projects and contract management.

As of December 2024, the government held a 72.84 per cent stake in the rail PSU.