5 Undervalued Railway Stocks to Watch Out in This Beaten Down Market

India's railways is one of the largest in the world. It has been a crucial part of the nation's transportation network for over 170 years.

Every day, millions of passengers and tons of freight move across the country, making railways a vital engine of economic growth.

In 2024, railway stocks were on a remarkable run, witnessing an unprecedented surge in value. With growing government investments, modernisation efforts, and a push towards privatisation, the sector has attracted strong investor interest.

But this rapid rise has made many railway stocks very expensive, raising concerns about valuations.

Here's the good news!

While several railway stocks are expensive, some hidden gems remain undervalued.

For those looking to board the railway investment train without overpaying, here are five undervalued railway stocks to watch out for.

#1 Texmaco Rail & Engineering

First on the list is Texmaco Rail & Engineering.

The company stands out as a key player in the railway sector, catering to both passenger and freight requirements with a diverse range of products.

The company specialises in manufacturing freight cars, auto car wagons, locomotive and coach bogies, hydro-mechanical equipment, and steel castings.

However, its expertise goes beyond manufacturing. It's also involved in designing, supplying, installing, and commissioning mainline railway and metro tracks.

With five state-of-the-art manufacturing facilities spread across West Bengal and Chhattisgarh, Texmaco has a strong production base.

Company	PE	Industry PE	10-yrs Average PE
Texmaco Rail	20.6	32.85	76.95

Source: Equitymaster

As of 28 February 2025, the stock is trading at a price-to-earnings (PE) ratio of 20.6, significantly lower than the industry average of 32.85 and its 10-year historical PE of 76.9.

This valuation suggests that the stock is currently undervalued compared to both industry peers and its past performance.

As a leading supplier of freight cars in India, Texmaco serves Indian Railways as well as major corporations such as Grasim, Vedanta, ACC Cement, Adani Ports, and SAIL.

The company delivered a stellar performance in the December 2024 quarter, with revenue from operations surging 47.9% YoY to Rs 13.3 billion (bn), while net profit more than doubled to Rs 760 million (m), driven by higher deliveries of freight cars.

Texmaco is actively working to expand its presence in global markets. The company has received a 3-star export house certification from the Government of India, strengthening its export credibility.

It is ramping up exports of wagons and components and looking to expand its footprint in foundry products across international markets.

Further strengthening its technological edge, Texmaco has entered into a strategic partnership with Polish technology firm Nevomo.

The two companies signed a Memorandum of Understanding (MoU) on February 24 to collaborate on next-generation Magrail technology, linear propulsion systems, and AI-powered rail innovations.

For more details, see the Texmaco Rail company fact sheet and quarterly results.

#2 Titagarh Rail Systems

Next on the list is Titagarh Rail Systems.

The company is mainly engaged in manufacturing and selling freight wagons, passenger coaches, metro trains, train electricals, steel castings, and specialised equipment.

It is also breaking new ground by becoming the first private sector company to manufacture Vande Bharat trains, demonstrating the growing role of private players in India's railway sector.

Currently, Titagarh Rail Systems is trading at a price-to-earnings (PE) ratio of 32.6 as of 28 February 2025, which is significantly lower than the industry PE of 32.9 and its own 10-year average of 54.

Company	PE	Industry PE	10-yrs Average PE
Titagarh rail	32.6	32.85	54.03

Source: Equitymaster

In the December 2024 quarter, the company reported a 5.5% decline in revenue to Rs 9 bn, while its net profit fell 16% YoY to Rs 628 m.

Looking ahead, Umesh Chowdhary, Vice Chairman & MD of Titagarh Rail Systems, has identified shipbuilding and maritime systems as a key future growth driver for the company.

With prior experience in delivering vessels for the Indian Navy, Coast Guard, and ocean research projects, as well as exports, Titagarh Rail now aims to scale up its presence in this sector by establishing new shipyards on both the eastern and western coasts of India.

With a strong order book of approximately Rs 3 bn in the shipbuilding segment, consisting of 10-11 vessels for the Indian Navy, Titagarh Rail is now positioning itself for larger shipbuilding projects to drive its next phase of growth.

For more details, see the Titagarh Rail SYSTEMS company fact sheet and quarterly results.

#3 IRCTC

Next on the list is IRCTC.

IRCTC is a Mini Ratna (Category 1, Central Public Sector Enterprises) and the only company authorised by the Indian government to provide online railway tickets, catering services, and packaged drinking water at railway stations and trains in India.

It manages catering and hospitality services at railway stations, on trains, and in other vital locations. It also promotes domestic travel and international tourism by developing budget hotels, special tour packages, and e-ticketing services.

As of 28 February 2025, IRCTC is trading at a PE ratio of 43.4, which is slightly below the industry PE of 45 and significantly lower than its 10-year average PE of 67.8.

Company	PE	Industry PE	10-yrs Average PE
IRCTC	43.37	45.03	67.84

Source: Equitymaster

For the December 2024 quarter, IRCTC reported a 10% YoY rise in revenue to Rs 12.3 bn. It reported a 14% YoY rise in net profit at Rs 3.4 bn.

Going forward, Going forward, the company plans to collaborate with State Tourism Boards to manage hotels and resorts under their jurisdiction, leveraging a zero land investment model.

Additionally, after fulfilling the packaged drinking water demand for railway passengers, IRCTC aims to expand its presence beyond the railway sector.

The company plans to supply packaged drinking water to ministries, PSUs, government institutions, and educational institutes. It also seeks to tap into private corporates, retail stores, hotels & restaurants, multiplexes, airports, and airlines, unlocking a broader market opportunity.

For more details, see the IRCTC company fact sheet and quarterly results.

#4 BEML

Next on the list is BEML.

BEML Limited (Bharat Earth Movers Limited) is a public sector company that manufactures rail coaches, metro cars, and other rolling stock for Indian Railways. BEML has been a key player in India's rail industry since the 1960s.

it was the first company in India to manufacture all-steel passenger rail coaches. BEML has a contract to build India's first indigenous bullet trains. The contract includes two high-speed train sets with eight coaches each.

As of 28 February 2025, BEML is trading at a price-to-earnings (PE) ratio of 39.4, lower than the industry PE of 59.6 and lower than its 10-year average PE of 50.8.

Company	PE	Industry PE	10-yrs Average PE
BEML	39.4	59.6	50.8

Source: Equitymaster

BEML's revenue from operations declined by 16% to Rs 8.7 bn, while its net profit nearly halved to Rs 244 m.

Going forward, the company is set to manufacture India's first indigenously built bullet trains under a contract worth Rs 8.7 bn.

In an exchange filing, BEML announced that it has secured an order from Indian Railways' production unit, Integral Coach Factory (ICF), Chennai, for the design, manufacturing, and commissioning of two high-speed trainsets. Each trainset will consist of eight coaches.

This project represents a major milestone in India's high-speed rail development, with the first indigenously designed and manufactured trainsets set to achieve a test speed of 280 kmph.

The trainsets will be produced at BEML's Bengaluru rail coach complex, with deliveries scheduled to be completed by the end of 2026.

For more details, see the BEML company fact sheet and quarterly results.

#5 IRCON International

Last on the list is IRCON International.

RCON International Limited (IRCON) is a public sector company that builds railway infrastructure in India and around the world.

The company designs and constructs signalling and communication systems, including mechanical, electronic, and fiber optic networks.

IRCON has successfully executed projects in multiple countries, including Malaysia, Nepal, Bangladesh, Mozambique, Ethiopia, Afghanistan, the U.K., Algeria, and Sri Lanka.

As of 28 February 2025, the stock is trading at a price-to-earnings (PE) ratio of 17.5, slightly below the industry PE of 18.8. However, it remains overvalued compared to its 10-year average PE.

Company	PE	Industry PE	10-yrs Average PE
IRCON International	17.49	18.8	7.9

Source: Equitymaster

For the December 2024 quarter, IRCON reported a 10.8% increase in revenue to Rs 26.1 bn, compared to Rs 29.3 bn in the previous year. However, net profit declined by 64.8% to Rs 861 m.

Going forward, the company aims to double its turnover within the next five to six years by securing large-scale railway and highway projects and expanding into emerging sectors like renewable energy.

In the renewable energy space, IRCON is progressing with its 500 MW solar project and actively exploring new EPC contract opportunities.

On the international front, IRCON is cautiously expanding its presence, focusing on stable markets while strategically navigating geopolitical and financial challenges.

For more details, see the IRCON International company fact sheet and quarterly results.

Snapshot of Undervalued Railway Stocks in India

Here's a quick view of undervalued railway companies in India from Equitymaster's stock screener.

Please note that these parameters can be changed according to your selection criteria.

Conclusion

The Indian railway sector is on track for unprecedented expansion, driven by ambitious modernization plans and record-breaking investments.

Key initiatives such as 100% rail route electrification, Vande Bharat's high-speed rollout, and PM Gati Shakti Cargo terminals are set to transform the industry.

With the Union Budget 2024-25 allocating a historic Rs 2.6 trillion (tn), railway stocks are poised to be major beneficiaries of this capital boost.

A significant US$ 15.3 bn investment in passenger coach manufacturing further strengthens the case for companies involved in coach and wagon production.

For investors seeking value amidst the sector's rally, undervalued railway stocks could present lucrative opportunities as modernisation efforts gain momentum. As India's railway network steers toward efficiency and expansion, these stocks are well-positioned to benefit.

Investors should evaluate the company's fundamentals, corporate governance, and valuations of the stock as key factors when conducting due diligence before making investment decisions.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...