Home / Markets / Stock Markets /  This Indian Railways stock may rally over 45% as brokerage sees upside

Rail Vikas Nigam (RVNL) hosted call with investors and analysts for business update. Weak order inflow has been a key concern for RVNL. For this, company highlighted, it has bided for orders of 210 bn. And out of opened tenders of 60 bn, it has won orders of 20 bn till date, highlighted brokerage IDBI Capital in a note. 

“RVNL has guided for order inflow of 150 bn in FY23E. Revenue execution in FY22 was strong, with an increase of 26% YoY and RVNL over mid-term (4-5 years) expects to maintain this as its revenue growth," the note stated.

The brokerage house has maintained its buy rating on RVNL shares with a target price of 42 apiece, implying a potential upside of about 45% from the current stock level.

“RVNL has also entered into large number of MOUs including both public and private players including Tata, Mahanadi Coalfields Limited, Jaykaycem, etc. RVNL expects order inflow of 150 bn including Rs50bn from the MoU and nomination," IDBI Capital's note added.

RVNL expects to grow it's footprint into non-railway sector and hence share from railways might go down in the upcoming years in its order book. In the last 5 years, RVNL revenue CAGR was 27% and RVNL guides to maintain the level with margins 5-6%.

“We have retained our EPS estimate for FY23/24E but lower valuation multiple to 6x FY24E EPS (earlier 7x) to arrive at target price of 42. Stock trades at 4x FY24E EPS and offers dividend yield of 7-8%," the brokerage said.

The PSU Railway stock has declined more than 15% in 2022 (year-to-date or YTD) so far, whereas the stock is down about 8% in a year's period. Rail Vikas Nigam Limited is a PSU company, under the ownership of Indian Railways, involved in building rail infrastructure. 

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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