Titagarh Rail share price jumps nearly 9% to 15-week high; here’s why

Titagarh Rail Systems, one of the largest freight wagon manufacturers in India, saw its shares zoom nearly 9% in today's intraday to hit a 15-week high of ₹1124.40 apiece after global brokerage firm Morgan Stanley initiated coverage on the stock with an 'Overweight' rating, setting a target price of ₹1,285 apiece. 

This target price represents a potential upside of 24% from the stock's previous closing price and marks a new all-time high for the stock. The stock's previous record high of ₹1,248 apiece was recorded in January. 

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Despite the stock's upward trajectory in recent years, yielding impressive returns, the brokerage identifies the passenger coach business as Titagarh's new growth driver. It notes that the market has yet to fully incorporate its earnings potential. 

The brokerage anticipates this growth to be fueled by the introduction of new products such as Vande Bharat, Amrit Bharat, and bullet trains, along with the increasing demand for metro projects.

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Titagarh Rail is the only company in India that holds the technology and capability to produce both stainless steel and aluminium metro coaches. Metro coaches present a huge opportunity for the company as the tier-I and tier-II cities are all going for the metro as the most suitable urban rapid transport system.

“Titagarh specialises in the comprehensive process of designing, manufacturing, supplying, commissioning, and servicing various types of rolling stock and metro coaches. The company's earnings visibility has been on the rise, propelled by policy initiatives such as 'AtmaNirbhar Bharat' and 'Make in India',” said Morgan Stanley. 

Morgan Stanley anticipates a robust 28% earnings CAGR between FY24 and FY27. This growth will be propelled by the execution of the order backlog within both the freight and passenger businesses. 

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Furthermore, it said the company will be bolstered by backward integration initiatives, including the production of the propulsion system (under license from ABB) and the manufacture of forged wheel sets through a joint venture with Ramkrishna Forgings.

Earlier, domestic brokerage firm Systematix Institutional Equities also highlighted the company as a significant beneficiary of the National Rail Plan (NRP), initiated by Indian Railways (IR). 

The plan outlines an ambitious investment of $750 billion spanning from FY22 to FY30, aimed at doubling freight-loading volumes to 3 billion tonnes by 2027 compared to the levels recorded in 2022. 

Additionally, the brokerage highlighted that the company has secured substantial orders in the passenger rolling stock business.

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Multibagger returns

Investor confidence in the railway sector is riding high, buoyed by its earnings visibility and the substantial capital expenditure plans outlined by Indian Railways. This optimistic sentiment has triggered a significant surge in the shares associated with the railway sector, with Titagarh Rail Systems emerging as a standout performer.

In CY23 alone, the company's shares witnessed an astounding return of 367%. Reflecting on previous years, the stock delivered impressive gains of 140.27%, 60%, and 19% in CY22, CY21, and CY20, respectively. Over the past five years, investors have enjoyed a remarkable return of 2185% on their investments in Titagarh Rail Systems.

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The company has a prominent presence in passenger and freight rolling stock; it offers mobility solutions and makes railway wagons, components, passenger coaches, and metro coaches. 

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.