Railway stock: Wagon maker Titagarh Rail Systems is a 'Buy', share price target Rs 1252, says Antique

In its latest note on Titagarh Rail Systems Ltd, Antique Stock broking said that the railways-linked company is undisputed leader in the wagon manufacturing space, adding that Titagarh is also among India's very few integrated manufacturers of passenger rail systems. Antique said Titagarh Rail has created a manufacturing set-up that is difficult to replicate, and has the capacity to grow its turnover to over Rs 9,000-10,000 crore over the next five years. The brokerage maintained its 'Buy' rating on the stock with a target of Rs 1,252.

On Monday, the railway stock closed a Rs 1,020.85 on BSE, down 1.76 per cent. Antique's target price on the counter suggests a 23 per cent upside potential. 

For the December quarter, Antique said Titagarh Rail Systems continued to deliver a robust performance, reporting a 25 per cent growth in revenue, 52 per cent jump in Ebitda and 91 per cent YoY surge in profit after tax.

"A strong execution in the freight rail segment coupled with operating leverage resulted in a 210 basis points expansion in Ebitda margin to 11.6 per cent, in line with our estimates. The order book (ex. forged wheels) stands robust at Rs 21,200 crore supported by private wagon, Vande Bharat, Ahmedabad Metro & Surat Metro orders the company received, providing strong visibility of 5.6 times TTM revenue," Antique said.

Titagarh Rail Systems, Antique said, has strategy and the plan ready for sustained growth in the long term. It expects the company to report 62 per cent earnings CAGR over FY23-26E, and generate strong return on equity (RoE) and return on capital employed (RoCE) of 22 per cent and 30 per cent in FY26.

"TRSL has an investment plan of Rs 600-700 crore over the next three years. We believe it recently concluded fund raising coupled with the expected strong cash flow generation in the next few years will support the company in meeting its growth objectives. We retain BUY rating on the stock with a target of Rs 1,252," Antique said.

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