This railway stock surges 77% in Jan; hits new high amid Budget optimism

Shares of railway stock extended their winning streak on Saturday, with state-owned companies Rail Vikas Nigam (RVNL), IRFC (Indian Railway Finance Corp), IRCON, IRCTC, RailTel rallying up to 15% in intraday trade. Investors continued to bet on PSU railway stocks amid hopes that the government may announce fresh investment proposals for the development of railway infrastructure in the pre-election interim budget. The government’s impetus on infrastructure development with a focus on ‘Make in India’ also augurs well for the railway stocks.

Among these PSU railway stocks, RVNL, the infrastructure arm of the Ministry of Railways, has emerged as one the biggest gainers, zooming nearly 77% in the current month of January. The largecap railway stock has maintained an uptrend for the last ten sessions and jumped around 73% during this period, scaling multiple new lifetime highs. In the past three months, the counter added 92%, while it soared 134% in the last six months. The stock has spiked 320% in the past one year.

On Saturday, RVNL shares were locked in its 10% upper circuit limit at ₹320.75 after the exchange revised its circuit limit from 20%. On Friday, the stock had ended 19.7% higher. At the new all-time high level of ₹320.75, the stock has risen 470% against its 52-week low of ₹56.15 touched on March 1, 2023.

RVNL, which made its stock market debut on April 11, 2019, has risen more than 1,500% against its initial public offering price (IPO) of ₹19 per share.  If an investor had invested ₹1 lakh in this share during the IPO, the amount would have turned to ₹16.84 lakh today.

The strong demand for RVNL shares can be attributed to significant execution capabilities in the railway segment and its strong order book position as well as low counterparty risk due to backing by the government of India. Currently, the government of India holds 72.84% equity in RVNL, following the dilution of 5.36% stake in Q1 FY24 to meet the minimum public shareholding requirement as per regulatory requirements for listed companies. The company’s order book as on June 30, 2023 stood at over ₹65,000 crore with a revenue visibility of more than 3 times the FY23 income from operations.

For the September quarter of FY24, RVNL posted a 3.4% growth in profit at ₹394.3 crore against ₹381.2 crore in the same period last year. Sequentially, the net profit jumped 15% from ₹343 crore in Q1 FY24. During the quarter under review, revenue increased marginally to ₹4,914.3 crore, as compared to ₹4,908.9 crore in Q2FY23, while EBITDA declined 5.6% to ₹298.3 crore from ₹315.9 crore year-on-year. The EBITDA Margin for the quarter stood at 6.1%, down from 6.4% in the same quarter in the previous year.

Established in 2003, RVNL received Mini Ratna public sector undertaking (PSU) status in 2013 and was upgraded to ‘Navratna’ status during FY23 by the department of public sector enterprises (PSE). 

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