Recommendation from Miscellaneous Sector

This section gives a recommendation of a stock having stock price below Rs 150 with sound fundamentals and expected to give handsome returns over a one-year time horizon.  [EasyDNNnews:PaidContentStart]

Rail Vikas Nigam Ltd : Picking Up Speed

HERE IS WHY
✓ Huge growth opportunities
✓ Good returns on equity
✓ Strong physical performance

Late Prime Minister Atal Bihari Vajpayee had announced National Rail Vikas Yojana (NRVY) to boost the rail infrastructure of India, under which Rail Vikas Nigam Ltd. (RVNL) was incorporated in 2003 to implement NRVY. It bears the status of ‘Category I Miniratna’ and operates as an extended arm of the Ministry of Railways. It undertakes various types of projects such as railway electrification, double, new line and gauge conversion projects, signalling and telecom, metro projects, and other workshops. It has entered into a concession agreement with the Indian Railways for sharing of freight revenue.

The company reported its highest ever consolidated net sales of Rs 15,404 crore in FY21 compared to Rs 14,531 crore in FY20. That is a growth of nearly 6 per cent. Such high turnover was possible because of the availability of funds for project expenditure by the Ministry of Railways. Also, the company has worked on speeding up the project execution process. The EBIDTA stood at Rs 1,246 crore in FY21 as against Rs 1,091 crore in the previous year which witnessed a growth of over 14.2 per cent. Also, the profitability improved by 19.8 per cent on the back of higher gross margin from project execution. The PAT was recorded at Rs 923 crore while it stood at Rs 770 crore in FY20.

The cash flows from operating activities increased from Rs (962) crore in FY20 to Rs 657 crore in FY21. Net sales for the quarter ended September 2021 came in strong at almost Rs 4,026 crore. That’s a growth of 4.05 per cent on QoQ basis and a growth of 26.5 per cent on YoY basis. The EBITDA (exclusive of other income) was Rs 227 crore which saw a slight decline of 0.54 per cent on a sequential basis but a rise of 38 per cent YoY. The net profit number stood at Rs 224 crore, again a rise of 5.11 per cent QoQ and a growth of 28.75 per cent YoY.

The company has ROE and ROCE of 17.27 per cent and 11.57 per cent, respectively. It has a debt-to-equity ratio of 1.06 which might be a bit of a concern to equity shareholders. However, the stock is trading near a price-to-earnings multiple of just 6.73. Also, RVNL has a relatively high dividend yield of 4.43 per cent. RVNL has made significant contribution to the building of rail infrastructure in the nation so far. In FY21, it has achieved a robust physical performance by executing total project length completion of 2,306.39 km (780.68 km of doubling, 181.57 km of gauge conversation, 1,340 km of railway electrification and 4.14 km of metropolitan transport project.

The company has also been able to successfully commission telecom works involving laying of optic fibre cables and six quad cables totalling 1,300 km. RVNL is executing projects in all the railway zones and 19 states of the country. In fiscal 2021, it executed offer for sale (OFS) by the divestment of 9.64 per cent equity shares. For the road ahead, the big buzz has been the central government’s likeliness of merging RVNL with Indian Railway Construction Ltd. The budget 2022-23 is likely to reveal several significant restructurings of the PSUs including RVNL along with other PSUs functioning under Ministry of Railways. By virtue of all these factors, we recommend our reader-investors to BUY the scrip.