Railway stocks in India have been Riding the Economic Express over the past year. The sector has embarked on an unprecedented journey over the past 12 months, witnessing an extraordinary surge in value. Major and emerging players like RVNL and Ircon International, have experienced staggering growth rates, with share prices skyrocketing nearly 300% and approximately 303%, respectively. Not to be outdone, Jupiter Wagons, Titagarh Rail Systems, and Texmaco Rail have displayed remarkable momentum, delivering returns of around 283%, 378%, and 322% during this period. Topping the list, IRFC has set the pace with an astounding 435% return.
This impressive performance prompts an intriguing question: what factors have fuelled this bull run in railway stocks in India? And will the sector continue to outshine others, potentially emerging as the sunrise sector of the economy in the coming years?
What has triggered the Bullish Run in Railway Stocks in India?
Established on April 16, 1853, Indian Railways boasts a vast network with over 126,366 km of tracks and 7,335 stations- as per the reports by Invest India. That being said, it is the 4th largest railway system in the world, the largest employer in India, and the 8th largest globally. As a vital component of India’s infrastructure, it is integral to the economic development of the country. Let’s have a look at the following reasons for the growth in this sector:
–Schemes and Policies: The recent bull run in railway stocks over the past 12 to 18 months can be attributed to government initiatives and policy developments. Initiatives like the Atmanirbhar Bharat Abhiyaan, PM Gati Shakti, and the launch of the Vande Bharat Express and Tejas Express have propelled growth in the sector, aligning with India’s goal of self-reliance.
–Increased Foreign Direct Investment (FDI) of up to 100% has also bolstered investment and infrastructure development. FDI inflows in railway-related components reached US$ 1.23 billion from April 2000 to March 2023. High-speed projects such as bullet trains, electrification of routes, re-development of Stations, lightweight aluminium coaches, and dedicated freight corridors have positioned the Indian Railways as an attractive investment opportunity.
–Budget 2023: In the Union Budget 2023-2024, Indian Railways secured its largest-ever capital outlay, receiving a staggering allocation of Rs 2,40,000 crores. This significant funding highlights the government’s commitment to enhancing railway infrastructure and boosts investor confidence in the sector’s growth potential.
Learn more about the opportunities in the Indian Railways on the official website of Invest India.
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Industrial Trends and Future Prospects
As observed, the government is focusing on building up the country’s infrastructure. The railway industry could be the next big thing in our economy. By 2050, India might be responsible for 40% of all rail activities worldwide. As per IBEF, a whopping Rs 50 lakh crore (US$ 715.41 billion) will be invested in railway infrastructure by the year 2030.
The interim budget for 2024-25 allocates Rs 2.55 lakh crore to Indian Railways, marking a 5.8% rise from the previous year. Finance Minister Nirmala Sitharaman introduced three major economic railway corridor programs:
-Energy, mineral, and cement corridors.
-Port connectivity corridors.
-High-traffic density corridors.
Additionally, the Finance Minister announced plans to convert 40,000 bogies to Vande Bharat trains to enhance safety and passenger convenience.
According to IBEF, Indian Railways has developed a National Rail Plan (NRP) for India – 2030. The aim is to build a railway system that is Future-Ready by 2030. The goal of the plan is to expand capacity before the demand arises. This strategy will meet future demand growth until 2050 and increase the share of railways to 45% in freight traffic, maintaining this level sustainably.
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Railway Stocks In India
The best stocks from the Railway and allied sector are IRFC, Ircon International Ltd, Texmaco Rail & Engineering Ltd, RVNL, Oriental Rail Infrastructure Ltd, Jupiter Wagons, Railtel Corporation of India Ltd, Titagarh Rail Systems Ltd, IRCTC, BEML and Container Corporation Of India Ltd.
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Let’s Explore Some Of The Railway Stocks In India
Indian Railway Catering & Tourism Corporation Ltd (IRCTC)
Indian Railway Catering & Tourism Corporation Ltd. tops the list of Railway stocks in India. IRCTC, categorized as a ‘Mini Ratna (Category-I)’ Central Public Sector Enterprise, operates under the Ministry of Railways, Government of India. With a Market Capitalisation of ₹76,556 Cr., it demonstrates impressive profitability ratios. Its Return on Capital Employed (ROCE) stands at 59.2% and its Return on Equity (ROE) at 45.4%. The price-to-earnings ratio is 72, surpassing its sector PE ratio of 63.64. The earnings per share (EPS) have been consistently positive, with a TTM EPS of Rs 13.3 per share, indicating healthy growth.
Being debt-free, the company maintains a zero debt-to-equity ratio. With a current-year dividend of Rs 5.50 and a yield of 0.58%, IRCTC exhibits stable performance. Promoter Share Holding remains steady at 62%, while the Annual Revenue surged by 87.57% to Rs 3,661 Crores last year. The Stock Price climbed 52.63% in the past year, outperforming its sector by 4.62%.
3-Year Performance:
-Profit Growth Compounded: 24%
-CAGR for Stock Price Growth: 45%
-Growth in Compound Sales: 16%
-Equity Return: 35%
Twelve-Month Trailing Period (TTM) Performance:
-Profit Growth Compounded: 20%
-CAGR for Stock Price: 49%
-Growth in Compound Sales: 34%
-Equity Return: 45%
The reliable and uniform growth positions IRCTC as a long-term player in the railway sector.
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Indian Railway Finance Corporation Ltd (IRFC)
Claiming the title of the largest railway stock on Indian exchanges, this company holds a substantial market cap of ₹2,08,247 Crores. With a respectable ROCE of 5.32% and ROE of 14.7%, it shows decent profitability. The price-to-earnings ratio is 35.02, indicating it might be considered a value stock with a lower PE ratio than its sector. Earnings Per Share is on the rise, reaching TTM Rs 4.64 per share. However, a Debt to Equity Ratio of 9.21 signals higher reliance on debt, raising concerns.
Despite this, a healthy dividend payout of 30.7% and a current-year dividend yield of 0.93% showcase the company’s stability. Promoter Share Holding remains consistent at 86.36%. Over the past year, this star performer, IRFC, saw a remarkable 17.89% increase in Annual Revenue to Rs 23,932.63 Crores. Simultaneously, the Stock Price soared by an impressive 421.99%, outperforming its sector by 353%.
3-Year Performance:
-Profit Growth Compounded: 26%
-CAGR for Stock Price Growth: 84%
-Growth in Compound Sales: 21%
-Equity Return: 15%
Twelve-Month Trailing Period (TTM) Performance:
-Profit Growth Compounded: -6%
-CAGR for Stock Price: 432%
-Growth in Compound Sales: 15%
-Equity Return: 15%
In summary, IRFC showcases impressive figures across various parameters.
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Jupiter Wagons Ltd
The mid-cap stock commands a market capitalization of ₹16,162 Cr. It focuses on manufacturing metal fabrication, including load bodies for commercial vehicles, rail freight wagons, and components. With robust profitability ratios, the current year’s ROCE is at 24.4% and ROE is at 16.8%. However, it appears slightly overvalued with a price-to-earnings ratio of 61.47, exceeding its sector’s PE ratio of 36.04. Nevertheless, the consistent growth of Earnings per Share to ₹6.71 over the past 5 years is promising.
The debt-to-equity ratio is healthy at 0.36, indicating majority financing through equity. The current year’s dividend yield is at 0.13%. Promoter Share Holding decreased by 2.25% in the recent quarter, now at 70.12%. The company gained attention due to its exceptional 12-month performance, with Annual Revenue increasing by 75.45% to Rs 2,073.33 Crores. Stock Price rose by 275.18%, outperforming its sector by 209.55%.
3-Year Performance:
-Profit Growth Compounded: 174%
-CAGR for Stock Price Growth: 159%
-Growth in Compound Sales: 154%
-Equity Return: 13%
Twelve-Month Trailing Period (TTM) Performance:
-Profit Growth Compounded: 173%
-CAGR for Stock Price: 292%
-Growth in Compound Sales: 88%
-Equity Return: 17%
Jupiter Wagons’ strong performance over the past three years positions it as a promising long-term contender.
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Rail Vikas Nigam Ltd (RVNL)
Rail Vikas Nigam Ltd categorised as a ‘Schedule A – Public Sector Enterprise’ and Navratna Company, is a large-cap company with a market capitalization of ₹59,006 Crores. The company maintains strong profitability ratios, with ROCE at 17.8% and ROE at 20.8%. Although its price-to-earnings ratio is 39.95, higher than its sector PE ratio of 39.68, its growing Earnings per Share (EPS) over the past years, with TTM EPS at ₹7.09 per share, indicates healthy growth.
With a debt-to-equity ratio of 0.87, mainly equity-funded assets are a positive sign. The current year dividend for Rail Vikas Nigam is Rs 2.13, yielding 0.76%. Promoter Share Holding remained stable in the most recent quarter at 72.84%. RVNL has delivered outstanding returns in the past 12 months, with a 291.91% increase in Stock Price, outperforming its sector by 209.16%. Annual Revenue increased by 5.43% in the last year to Rs 21,278.04 Crores.
3-Year Performance:
-Profit Growth Compounded: 23%
-CAGR for Stock Price Growth: 109%
-Growth in Compound Sales: 12%
-Equity Return: 19%
Twelve-Month Trailing Period (TTM) Performance:
-Profit Growth Compounded: 10%
-CAGR for Stock Price: 294%
-Growth in Compound Sales: 1%
-Equity Return: 21%
In conclusion, RVNL plays a vital role in the Railway sector in India.
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Titagarh Rail Systems Ltd
Titagarh Rail Systems Ltd, a mid-cap stock, is primarily involved in manufacturing and selling Freight Wagons, Passenger Coaches, Metro Trains, Train Electricals, Steel Castings, Specialized equipment & Bridges, Ships, and more. With a Market Cap of ₹13,802 Crores, it exhibits robust profitability, boasting an ROCE of 17.6% and ROE of 13.9%. Although its price-to-earnings ratio is 54.02, higher than its sector PE ratio of 36.04, the company consistently increases its earnings, with Earnings per Share standing at ₹20.3, indicating good health.
A Debt to Equity Ratio of 0.26, less than 1, indicates a low proportion of debt, with assets mainly financed through equity. The current year dividend for Titagarh Rail Systems is Rs 0.50, yielding 0.05%. Promoter Share Holding decreased by 2.51% in the most recent quarter to 42.46%. Impressively, Annual Revenue surged by 43% in the last year to Rs 2,822.17 Crores, and the Stock Price rose by a remarkable 420.87%, outperforming its sector by 355%.
3-Year Performance:
-Profit Growth Compounded: 76%
-CAGR for Stock Price Growth: 170%
-Growth in Compound Sales: 16%
-Equity Return: 4%
Twelve-Month Trailing Period (TTM) Performance:
-Profit Growth Compounded: 135%
-CAGR for Stock Price: 394%
-Growth in Compound Sales: 69%
-Equity Return: 14%
The stock is a key player in the industry.
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BOTTOM LINE
Summing up, with the government’s heightened emphasis on railway and infrastructure development, the sector is poised to emerge as the next sunrise industry. The allocation of record-high capital outlays in the Union Budgets of 2023-24 and 2024-25, coupled with encouraging FDIs and development programs, will bolster the confidence of both domestic and foreign investors in the sector. The impressive performance of Railway Stocks in India over the past 12-18 months underscores this trajectory of growth and opportunity. The ‘Make in India’ campaign, alongside the introduction of flagship projects like the ‘Vande Bharat Express’ and ‘Tejas Express’, signifies India’s stride towards self-reliance and global competitiveness in the railway sector. These initiatives not only foster domestic manufacturing and innovation but also position India to emerge as a leading exporter in the years ahead.
With a focus on job creation, technology advancement, and economic growth, these efforts pave the way for a more robust and sustainable railway industry. Ultimately, the Railway Stocks In India presents a spectrum of opportunities, each with its own set of strengths and potential for growth.
That’s all for today’s post. Hope you get some valuable insights from here.
Happy reading!
Disclaimer
The blog is meant for informational purposes and serves the general analysis of the stocks. The contents provided here are based on careful research and analysis utilizing the fundamental and technical indicators over a while. The post does not consist of any direct recommendation about Investing or trading in the securities market. Thorough research and careful consideration are necessary for individuals to fulfil their responsibility in making financial decisions. Seeking professional advice before making any financial decisions is always advisable.
