Titagarh Rail Systems Sees Significant Growth Prospects and Earnings Visibility

Titagarh Rail Systems Sees Significant Growth Prospects and Earnings Visibility

VoM News Desk | January 9, 2024 | 01:55 PM IST | Breaking News | Follow on Google News

Titagarh Rail Systems Sees Significant Growth Prospects and Earnings Visibility/Mint

Titagarh Rail Systems Sees Significant Growth Prospects and Earnings Visibility

Investor enthusiasm towards the railway sector continues to soar, especially given Indian Railways’ massive capital expenditure plans. Titagarh Rail Systems, the largest wagon manufacturer, has reaped substantial benefits, reflecting a staggering 367% return in CY23. This follows positive returns in CY22, CY21, and CY20, showcasing the company’s consistent growth trajectory.

Systematix Institutional Equities foresees this positive momentum extending into CY24, emphasizing the company’s robust position amidst significant capital expenditure in the railway sector.

The brokerage highlights Titagarh’s substantial order book of ₹143 billion in the freight rolling stock (FRS) segment, offering a 4-year visibility on annualized H1FY24 revenue. Additionally, the company’s strong orders from private players underscore its solid footing in the market.

Expanding Opportunities in the Passenger Rolling Stock (PRS) Segment
Titagarh Rail Systems has made noteworthy strides in securing orders in the passenger rolling stock business. Its contracts with GMRC for Surat Metro and Vande Bharat signify its growing presence in the Passenger Rolling Stock (PRS) segment.

The brokerage highlights the company’s unique capability to produce both stainless steel and aluminum metro coaches, positioning it uniquely in the Indian market.

Sustained Revenue Visibility
With substantial orders for metro cars and Vande Bharat coaches, Titagarh’s revenue visibility remains robust for the next 5-6 years. Almost half of its ₹282 billion order book falls under the passenger rolling stock business, ensuring long-term attractiveness, especially with repair and maintenance contracts.

Capacity Expansion for Future Growth
Anticipating future opportunities, Titagarh aims to triple its passenger coach capacity from 20 to 70 cars per month by FY27. This strategic move aligns with its plans to meet current orders and tap into future prospects.

Financial Growth Outlook
The company’s strong order flow and efficient execution are expected to yield remarkable financial growth. Estimates suggest a substantial increase in EBITDA and PAT over the FY23-FY26 period, showcasing a threefold rise in EBITDA and a fivefold jump in PAT.

The brokerage projects impressive revenue, EBITDA, and APAT growth rates from FY23 to FY26E, indicating a compound annual growth rate (CAGR) of 35%, 43%, and 54%, respectively.

Initiation of ‘Buy’ Rating
Considering the robust earnings growth and promising future prospects, the brokerage has initiated coverage on the stock, setting a target price of ₹1,202 per share, indicating a potential upside of 19.36% from the previous closing price of ₹1,007 per share.

VoM News Desk

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