IRFC shares rise 44% in a month, approach record high; can the rally continue?

Shares of Indian Railway Finance Corporation Ltd (IRFC), the financial arm of the Indian Railways, have delivered 44% returns to shareholders in a month. The IRFC stock, which closed at Rs 33.37 on July 6 rose to an intraday high of Rs 48.25, clocking 44.59% returns on BSE. The railway stock also approached its all-time high of Rs 48.29, reached on August 4 this year. The IRFC stock gained 6.88% to Rs 48.25 on BSE today. Market cap of the firm rose to Rs 62,310 crore. Total 135.80 lakh shares of the firm changed hands amounting to a turnover of Rs 64.06 crore, among the highest on BSE.

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On the other hand, the railway stock hit a 52-week low of Rs 20.55 on September 26, 2022. The IRFC stock has zoomed 125% in the last one year. In the current year, the stock has rallied 47%. The IRFC stock has a PE of 9.85, which indicates it’s overvalued compared to the sector. The sectoral PE stands at 6.41.

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In terms of technicals, the relative strength index (RSI) of IRFC stands at 85.9, signaling it's trading in the overbought zone. IRFC stock has a one-year beta of 0.8, indicating very low volatility during the period. IRFC stock is trading higher than the 5 day, 10 day, 20 day, 50 day, 100 day and 200 day moving averages.

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Here’s a look at what analysts said on the outlook of the stock.

Abhijeet from Tips2trades said, “IRFC stock price is overbought on the daily charts with next resistance at Rs 49. Investors should be booking profits at current levels as a daily close below the support of Rs 42.5 could lead to a target of Rs 38.85 in the near term."

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Ravi Singh, Vice President and Head of Research, Share India said, "The outlook of IRFC is positive as rising finance cost has impacted profitability wrt the robust growth in sales. Also, the stock is showing strength on technical setup and investors may continue to hold their positions for the target of Rs 50 levels."

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Vaishali Parekh, Vice President - Technical Research, Prabhudas Lilladher said, "The stock has given a decent rally from Rs 33 zone to touch the high of Rs 48 levels near the resistance zone of 49-50 levels and can witness some profit booking or consolidation. The near-term support lies near Rs 43 zone and one can hold the stock keeping this level in mind. A decisive breach above the Rs 49 zone, shall indicate a breakout for further upside movement with next target of Rs 57-60 zone."

Aditya Gaggar, Director of Progressive Shares said," After breaching the strong hurdle of Rs 37 with volumes, follow-up buying was witnessed in the counter. The stock is headed towards the target of Rs 49. Momentum Indicator i.e. RSI stands at 84 which indicates a slightly overbought condition and minor correction is warranted and such a dip (Rs 41-Rs 41.50) should be capitalized as a buying opportunity."

Shrey Jain, Founder and CEO of SAS Online said, "IRFC's stock shows a robust uptrend, with a recent breakout from a 7-month cup and handle pattern. This breakout signals a potential upside in the stock's value and is accompanied by increasing trading volumes, indicating growing invest6or interest. The government's continued focus on infrastructure development, including railways, further enhances IRFC's growth prospects."

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Osho Krishan, Sr. Analyst - Technical & Derivative Research, Angel One said, "IRFC has seen good traction from the past couple of trading sessions, leading to a strong surge in the counter to clock new highs. On the technical front, the counter has seen a volume-based breakout around 36 odd levels and continued its upward march. As far as levels are concerned, the zone of 36-34 is likely to act as sacrosanct support, before which the 40-38 zone could cushion any blip. On the flip side, till the counter is able to sustain above the support zones, it is likely to trade with a positive bias. It could continue its march in uncharted territory, but at the same time, one needs to avoid being complacent and have a pragmatic approach in the counter."

The company will announce its Q1 earnings on August 11, 2023.

IRFC logged a profit of Rs 6,337 crore for the financial year 2022-23. Revenue from operations for FY23 rose 17.70 per cent to Rs 23,891 crore as against Rs 20,298 crore reported a year ago. The earnings per share of the company were Rs 4.85 at the end of FY23 as compared with Rs 4.66 in the year-ago period.

The board proposed a final dividend at 7 per cent of face value of Rs 10 each i.e. 70 paise per share for FY 2022-23.

For the March 2023 quarter, profit slipped 10.9% to Rs 1,328 crore from Rs 1,492 crore a year ago. Consolidated revenue from operation climbed 5.14 per cent to Rs 6,236 crore for the March quarter as compared to Rs 5,931 crore in the year-ago period. The company will announce its earnings for the June 2023 quarter on August 11.

Indian Railway Finance Corp borrows funds from the financial markets to finance the acquisition/creation of assets which are then leased out to the Indian Railways or any entity under the Ministry of Railways.