Multibagger Railway stock bags Rs 170 crore order from the Ministry of Defense for specialized wagons; Is this stock poised for takeoff?

Scheduled to commence 12 months after contract signing, the execution is set to span over 36 months.

Indian investors cheered a double dose of good news today, sending key indices higher. The benchmark Sensex and Nifty gained ground, fueled by a post-earnings surge in Mahindra & Mahindra and sustained buying in public sector banks.

However, the rupee wasn't quite swept up in the jubilant mood. Local oil companies' dollar demand countered the positive global outlook, keeping the domestic currency relatively stable.

While investors may be keeping a watchful eye on the market movements, Titagarh Rail Systems Ltd offered another reason for optimism. The company secured a significant order from the Ministry of Defence, Government of India, for the procurement of 250 specialized wagons. This contract holds a substantial value of approximately Rs 170 Crore. The order entails the manufacturing and supply of these specialized wagons, serving the specific requirements outlined by the Defence Ministry. Scheduled to commence 12 months after contract signing, the execution is set to span over 36 months.

This domestic contract underscores Titagarh's prowess in catering to the nation's defence needs, contributing to its revenue growth and operational stability. Furthermore, it highlights the company's capability to secure lucrative government contracts, enhancing shareholder confidence and market positioning.

Q3FY24 Financials

Titagarh Rail Systems Ltd. achieved remarkable growth in its Q3FY24 financial results, with substantial year-over-year increases across key indicators. Sales surged by 25 per cent, while EBIDT and net profit soared by 69 per cent and 136 per cent respectively, demonstrating robust operational performance. Moreover, EPS more than doubled, reflecting enhanced profitability and shareholder value.

Top of Form

Q3FY24 Concall analysis

• Achieved a record production of 1,021 wagons in December 2023, and aims to stabilize at that run rate within this financial year.
• Raised Rs 700 crores through a QIP in December 2023, which received strong response from marquee investors.
• The company signed a strategic partnership with ABB Ltd for development of propulsion and TCMS for metro trains, and a strategic alliance with Sidwal Refrigeration for interiors and other components for passenger rail systems.
• The company has a healthy order book of Rs 27,500 crores, comprising of freight, passenger, wheelset, AMC and shipbuilding segments. The company is actively pursuing new tenders in the metro and Vande Bharat segments.
• The company expects to start the production of Bangalore Metro coaches with CRRC in Q2 or Q3 of FY25, and ramp up the capacity to 20 coaches per month in FY25 and 70 to 72 coaches per month in 3 to 4 years.
• The company expects to complete the design and launch of Vande Bharat train by June 2025, and deliver the first train as per schedule.
• The company is adequately capitalized for the current level of capacity expansion and order execution, and does not plan to raise any further capital in the near future.
• The company is exploring the possibility of inducting a strategic partner for the shipbuilding and defence business, to unlock its growth potential without drawing upon the resources of the rail business.
• The company is confident of maintaining its market leadership in the freight segment, and achieving market leadership in the passenger segment, with its first mover advantage and backward integration strategy.

Riding a wave of Q3 growth (25 per cent sales jump, 136 per cent net profit surge), Titagarh Rail Systems secured a significant defense contract (Rs 170 crore) solidifying its market position. With a healthy order book (Rs 27,500 crore) and strategic partnerships (ABB, Sidwal), they're well-positioned to capitalize on opportunities like Bangalore Metro and Vande Bharat projects, fueling future success. Expecting to maintain market leadership in both freight and passenger segments, Titagarh's future looks bright.

Shares of Titagarh Rail Systems Ltd are trading at Rs 956.5 per share down 23 per cent from its 52 week high price of Rs 1,249. The stock has delivered multibagger returns of 347.17 per cent in past 1 year. Thus investors should keep an eye on this multibagger railway stock.

Disclaimer: The article is for informational purposes only and not investment advice