RVNL shares tumbled 9% on Budget day, what's next?

Shares of Rail Vikas Nigam Ltd (RVNL) crashed 9% on February 1 after railways sector did not see any rise in its Budgetary allocation in Union Budget 2025. While the railways sector saw an allocation of Rs 2.4 lakh crore in FY24, the FY26 estimates were unchanged at Rs 2.5 lakh crore against FY25  Budgetary estimates of Rs 2.5 lakh crore.     

This led to negative sentiment around railway stocks on Budget day. RVNL stock fell 9.03% to Rs 433.45 on BSE on February 1. Market cap of RVNL stood at Rs 90,375 crore on BSE. RVNL shares have a one-year beta of 1.6, indicating high volatility during the period. 

Meawnhile, brokerage Axis Securities has a 'Buy' call on RVNL shares with a target price of Rs 501. The call has a duration of three to six months. 

"The company expects EBITDA margins to improve owing to addition of variable-priced projects to the order book portfolio offering better margins. With pick up in execution in H2FY25 we expect the margins to be around 6% in FY25-26E," the brokerage said.

"The company maintains a robust order book, supported by a clean balance sheet, strong return ratios and a healthy dividend payout. As of June 30, 2024, the company's order book stood at Rs 83,221 crore, across various segments like Railway EPC, Coach production & Electrification works. This gives revenue visibility for the next 3-4 years. With its established track record of execution, the company is positioned for steady revenue growth, projecting an 8 per cent CAGR over the period from FY23 to FY26E," added the brokerage. 

In terms of technicals, the relative strength index (RSI) of RVNL stands at 52.5, signaling it's trading neither in the overbought nor in the oversold zone. Rail Vikas Nigam shares are trading lower than the 5 day, 100 day, 150 day, 200 day but higher than the 10 day, 20 day, 30 day, 50 day moving averages.

RVNL is an executing arm of Indian Railways and works for and on behalf of the ministry for projects assigned to it for execution. It works on a turnkey basis and undertakes the full cycle of project development from conceptualisation to commissioning including stages of design, preparation of estimates, calling and award of contracts, project and contract management.