RVNL shares: Up 381% from 52-week low, should investors expect correction in the railway stock?

Shares of Rail Vikas Nigam Ltd (RVNL) have rallied 322% in a year, turning the large cap stock into a multibagger during the period. RVNL stock rose from Rs 33.05 on May 4, 2022 to Rs 139.50 (a fresh record high) on May 4, 2023. Meanwhile, the 30-stock Sensex has gained 7.4% during the same period. The parent index BSE 500 has climbed 6.10% during the period.

In the current trading session, the stock touched a record high of Rs 139.50, rising 7.14% on BSE. Total 14.12 lakh shares of the firm changed hands amounting to a turnover of Rs 19.37 crore. Market cap of the firm rose to Rs 28,564 crore on BSE. RVNL shares have gained 90.77 % this year and risen 72 per cent in a month. The stock hit a 52-week low of Rs 29 on June 21, 2022. It has risen 381% from its yearly low.

In terms of technicals, the relative strength index (RSI) of RVNL stands at 91.8, signaling it's trading in the overbought zone. RVNL stock has a one-year beta of 0.9, indicating low volatility during the period. Rail Vikas Nigam stock is trading higher than the 5 day, 20 day, 50 day, 100 day and 200 day moving averages.

In the December quarter of this fiscal, net profit climbed 30.51% to Rs 382.42 crore against Rs 293.01 crore during the previous quarter ended December 2021. Sales stood flat at Rs 5012.09 crore in Q3 against Rs 5049.24 crore during the quarter ended December 2021.

Here’s a look at what analysts said about the prospects of the RVNL stock.

Pravesh Gour, Senior Technical Analyst, Swastika Investmart said, “RVNL is in a strong uptrend and has broken a bullish flag formation. It created a base around Rs 100; however, Rs 140 is an immediate resistance where it may see some pause, but above this, it is likely to head towards Rs 150 levels. On the downside, Rs 100 is a major support at any correction, while Rs 87 is the next critical demand level. MACD and RSI are supporting the strength of the current movement. Investors can follow the buy-on-dip strategy when taking a new position on the counter.”

Ravi Singh, Vice President and Head of Research, Share India, “Govt’s railway infra push helped stock price surge more than 70% in last 1 month and 200% in 6 months. RVNL will be a key beneficiary of govt’s Rs 2.5 lakh crore budget for Railways and lot of contracts will come through RVNL. Recently, RVNL also begged two big orders from Gujarat Metro Rail Corporation. Company’s financials also look robust. The company reported a 27% sales growth in the last 5 years and 25% profit growth. On the technical setup, the stock is strongly bullish with RSI above 90. After some corrections, stock might rally further toward Rs 150.”

Abhijeet from Tips2trades said," RVNL stock is extremely overbought on the daily charts with strong resistance at Rs 129. Investors should book profits at current levels as a close below support of Rs 118 could lead to Rs 91 in the near term."

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.

Ravi Singhal, CEO, GCL Broking said, " Valuations of RVNL are not comfortable
but still buy on dips is recommended near Rs 100 levels. If we see as per valuations, stock is trading above industry avg PE and Price to book is also above comfortable levels. So wait for dips for new entry. If someone wants to hold, then should keep a stop loss of Rs 117."

Vinit Bolinjkar- Head of Research - Ventura Securities said, "RVNL stock is trading at FY25 EV/EBITDA of 10.9X which is on the higher side compared to its long-term average of 7.0X. Though the valuations are on the higher side, RVNL is entering the next leg of growth through diversification and faster project execution. We believe that the company should be looked at as a multi-year growth story and we recommend holding it for the long-term. Given the order booking pipeline of Indian Railways for the next 7-8 years, we believe that the order inflow could sustain RVNL. In addition, the company has also started taking orders from non-railway segments, such as:

1) RVNL emerged as an L1 bidder for the Mahi Bajaj Sugar irrigation project. The total cost is Rs 2249 cr.

2) The company also bagged the contract for the Chennai Metro Rail Ltd phase 2 project, with a total order book of INR 3146 cr. So a turnkey project operator, which used to take only Indian Railways projects is diversifying in other infrastructure areas, thereby de-risking its business model."

Om Mehra, Equity Research Analyst, Choice Broking said "In recent months, the stock prices of several Indian companies that assist in the country's railway infrastructure have skyrocketed. This surge in demand for railway services has made these companies an attractive investment opportunity, especially with the government's plans to expand the railway network. One such company that has witnessed a massive surge in its stock price is RVNL, a special purpose vehicle (SPV) that undertakes and successfully executes railway construction projects. RVNL's stock price has surged by a staggering 288% in just one year, compared to Sensex's return of only 7.4%."

"RVNL's incredible rise in stock price can be attributed primarily to its announcement of being granted the prestigious 'Navratna' status by the Department of Public Enterprises. Additionally, RVNL was the lowest bidder for the Mahi Bajaj Sagar Project in Banswara, Rajasthan, which is valued at Rs 2249 crore. Before its massive breakout, RVNL had been consolidating within the 62-84 zone. The surge in its stock price was fueled by a significant increase in delivery volume of 62.77% in the past month. The relative strength index (RSI) is still in an uptrend and sustaining above 80 levels, indicating that the script has had a swift up move and strong momentum. Although it may be a good time for profit booking in RVNL, the upward momentum is likely to continue as the entire railway sector appears to be quite strong. Long-term investors can wait for a correction and accumulate in tranches as stock may test around 150-165 in the next few months. Overall, RVNL has proven to be a multi-bagger stock for investors. The company's promising future and the Indian government's commitment to expanding the railway network make RVNL a compelling investment opportunity for both short-term and long-term investors," he added.

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