This railway related stock has zoomed 91% from June 5 low

Shares of Titagarh Rail Systems hit a new high of Rs 1,896.50, surging 7 per cent on the BSE in Thursday's intra-day trade on account of a healthy business outlook.

Shares of Titagarh Rail Systems (TRSL) hit a new high of Rs 1,896.50, surging 7 per cent on the BSE in Thursday’s intra-day trade, thus extending its past one week rally owing to healthy business outlook. The stock of rolling stock manufacturer was trading higher for the sixth straight day, soaring 28 per cent during this period. It has zoomed 91 per cent from a low of Rs 993.55 hit on the BSE on June 05.

TRSL is the largest private sector manufacturer of Wagons and established player in railway coaches (EMUs, MEMUs). The company’s product range includes electric propulsion equipment such as traction motors and vehicle control systems. It also designs and manufactures wagons such as container flats, grain hoppers, cement wagons, clinker wagons and tank wagons. Its business is divided into four divisions: Railway Freight, Railway Transit, Engineering and Shipbuilding.

The company’s operations have recently expanded substantially and also diversified in terms of the products in the two operating segments with prestigious orders for Railway Wagons, Vande Bharat trainsets, Forged Wheels and multiple Metro Coaches.

With the increase in demand for Freight and Rolling stock owing to the Indian Railway’s initiative of increasing its market share in the overall share of logistics coupled with the Make in India and Atmanirbar Policy, the company is augmenting its production capacity for both the operating segments to meet the growing demand.

TRSL’s order book of Rs 28,076 crore as on March 31, 2024, provides medium-to-long term revenue visibility based on execution timelines. On a year-to-date basis, TRSL has received projects including Vande Bharat order share (Rs 7,026 crore), Surat Metro order (Rs 858 crore), Ahmedabad Metro order (Rs 350 crore) and Wheelset manufacturing (TRSL share of Rs 6,300 crore, to be executed as Joint Venture [JV] with Ramakrishna Forgings, [RFL]). This is on top of the large existing wagon orders from the India Railways to be completed over fiscals 2025-2027.

On Tuesday, June 25, CRISIL Ratings (CRISIL) revised its outlook on the bank facilities of TRSL from “CRISIL A+/Stable/CRISIL A1” to “CRISIL AA-/Stable/CRISILA1+”.  The rating upgrade takes into account better operating efficiency as reflected in higher profitability, healthy execution in the freight wagon segment during fiscal 2024 and presence of diversified order book providing medium term revenue visibility, the ratings agency said.

With orders coming in from the passenger rolling stock segment, the order book composition has also diversified from Freight: Passenger ratio of 89:11 (as on March 31, 2022) to 54:46 (as on March 31, 2024). However, the timelines of passenger rolling stock segment orders vary at around 18 months from receipt of Letter of Acceptance (LOA)) and hence any meaningful contribution to revenue and profitability will come at the end of fiscal 2025. The successful buildup of prototypes under the development stage and execution as per contract timelines along with expected margins would remain a key monitorable, CRISIL said in its rationale.