Titagarh Rail, RK Forgings surge up to 8%, hit new highs on strong outlook

Ramkrishna Forgings surged 8% to Rs 968.95 and TRSL soared 7% to Rs 1,689.95 in the intraday trade today

Shares of Titagarh Rail Systems (TRSL), and Ramkrishna Forgings (RKFL) rallied up to 8 per cent on the BSE on Monday, hitting their respective new highs in the intraday trade, on healthy business outlook.

RK Forgings surged 8 per cent to Rs 968.95, while TRSL soared 7 per cent to Rs 1,689.95 in the intraday trade. These stocks have zoomed 57 per cent and 70 per cent, respectively, from their June 5 lows. In comparison, the BSE Sensex was down 0.41 per cent at 76,883.

Last year, on June 15, 2023, these companies had informed that a consortium between RKFL and TRSL has been awarded the contract to manufacture and supply 1.54 million forged wheels over a span of 20 years, under the Aatmanirbhar Bharat Initiative by the Ministry of Railways, Government of India.

The contract will see the consortium delivering 40,000 forged wheels during the first year, 60,000 wheels in the second year, and 80,000 wheels every subsequent year thereafter, with the total contract valued at Rs 12,226.5 crore, TRSL had said in an exchange filing.

An initiative to reduce India's reliance on importing wheels from foreign countries, the Aatmairbhar Bharat Initiative has facilitated manufacturing opportunities for Indian firms to build and supply quality forged wheels to the Indian Railways. Aligning with the government's vision and dream of making India truly self-reliant, the Indian Railways, eventually, aims to achieve 100 per cent localisation of wheel production through private Indian entities and cater to future growth in demand entirely through domestic production.

The wheels manufactured under this agreement will cater to the requirements of multiple platforms, such as the LHB coaches, WAG9 Locomotives, Vande Bharat Express Trains, etc.

TRSL is the largest private sector manufacturer of Wagons and an 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.

As on March 31, 2024, TRSL's total order book stood at Rs 14,750 crore. The company's share of the order book in joint ventures stood at Rs 13,326 crore. Of these, Rs 7,026 crore or 53 per cent was for Vande Bharat with BHEL, and Rs 6,300 crore or 47 per cent for wheelsets with RKFL.

RKFL is a supplier to various sectors like Automotive, Railways, Farm Equipment, Bearings, Oil & Gas, Power and Construction, Earth Moving & Mining, both in India & overseas markets.

Sharekhan expects RKFL to benefit from the commercial vehicle (CV) upcycle across geographies, led by improved prospects for commercial vehicle (CVs) in India and globally. Global OEMs and tier-1 suppliers maintain a positive outlook for the CV segment.

RKFL is committed to growing its business profitably and de-risk its business model through diversifying into new geographies and sectors and widening its product portfolio. Counterparty risks are low due to the established business position of RKFL's customers from domestic and export markets and the criticality of the components manufactured.

The brokerage firm expects RKFL to be a beneficiary of improving demand. The company's focus on increasing the share of value-added and critical components will help improve realisations and Ebitda margins, it said in a post Q4 results report dated May 5. The stock, however, is trading above the brokerage firm's target price of Rs 888 per share.