Why Titagarh Rail Systems Share Price is Rising

Investor confidence in the Indian railway sector is soaring.

This optimism is fuelled by two main factors: The reliable nature of earnings in the railway industry and the substantial capital expenditure plans announced by the Indian government.

This positive sentiment has sparked a significant rise in the share prices of companies associated with the railways.

Titagarh Rail Systems, a prominent player in this sector, has emerged as a standout performer.

Titagarh Rail Systems share price delivered impressive gains of 193% over the past year. The company's impressive performance is evident not only over a longer timeframe but also in the recent past.

In the last month alone, its share price rallied an impressive 32.3%, with a 12.8% gain in just the last five days.

Read on further to know what factors are propelling Titagarh Rail Systems share price.

#1 Strong Financial Performance

Titagarh Rail Systems reported strong financial results for FY24. Its net profit saw a significant increase of 158%, reaching Rs 2.7 billion (bn) in FY24 compared to Rs 1 bn reported in FY23. This rise can be attributed to a significant increase in the company's total revenue.

FY23's results were impacted by an exceptional item, an unusual expense that reduced its profits. No such item burdened FY24 financials.

Revenue from operations mirrored the net profit trend. It achieved highest ever turnover in FY24, experiencing an increase of 38% from FY23. This jump, from Rs 28.2 bn in FY23 to Rs 40 bn in FY24, can likely be attributed to a strong order book, indicating a surge in customer demand and production.

The board declared a dividend of 40% on the face value of stock, translating to Rs 0.8 dividend per share for FY24.

#2 Strong Order Book

The company experienced a significant influx of orders, driven by the overall growth of the Indian railway sector. This positive trend is evident in its impressive total order book for FY24, which stood at a substantial Rs 147.5 bn.

It's worth noting that a significant portion of this order book, Rs 133.2 bn, originated from the company's joint ventures.

Breaking down the order book further, freight rolling stock, including shipbuilding, makes up a substantial portion (around 54%) with a value of Rs 80 bn. The remaining Rs 67.5 bn represents orders for passenger rolling stock.

The Indian railway sector's continued growth is expected to translate into sustained demand for its products, potentially leading to a robust order book in FY25.

What Next?

Titagarh Rail Systems is experiencing a period of significant growth, fuelled by robust industry demand.

India's overall wagon demand sits at roughly 30,000-35,000 units annually, and the company's current annual production of 12,000 units positions it well. The government has planed for new freight corridors. This suggests even greater demand on the horizon.

To meet this growing demand and expand into new areas, it has earmarked a significant investment of around Rs 10 bn over the next couple of years.

This investment will be directed towards building capacity for passenger coaches, upgrading facilities, pursuing backward integration efforts, and undertaking special projects.

A key area of growth is its wagon production. It plans to significantly increase its run rate, from 700 units last year to around 950 units this year.

While the freight wagon business remains a core strength, the company also has high hopes for its passenger rail systems (PRS) division. While initial contributions from PRS are expected in FY25, an inflection point is anticipated in FY26 and FY27.

The company is actively expanding its capacity for metro coach production, aiming for a total of 36 cars per month.

Additionally, a separate Vande Bharat line is being established with a projected capacity of 36 cars per month. This aggressive expansion plan highlights its commitment to the PRS segment.

In the current financial year, it is confident of achieving a production rate of around 15-20 cars per month for the metro line. This initial production is expected to generate PRS margins in the low double digits, approximately 10%.

With the inclusion of its announced propulsion systems alongside the rolling stock (within a few years), it anticipates a further margin expansion of 4-5%.

The company is also focusing on backward integration for propulsion systems, aiming to achieve in-house production of most equipment within the next 3 years.

The company has switched to manufacturing stainless steel metro coaches for improved cost efficiency, positioning it to be competitive in the market. Additionally, it's looking at the export potential for metro coaches due to its higher value compared to wagons.

While it is already fulfilling some export orders for components, the company plans to explore broader exports once established domestically.

In conclusion, the company is well-positioned for continued growth across its business segments. It is capitalising on strong industry demand, investing heavily in capacity expansion, and pursuing strategic initiatives like backward integration.

However, it's important to note that the success of these ambitious plans hinges on factors like consistent government spending and the company's ability to execute its expansion effectively.

How Titagarh Rail Systems Share Price has Performed Recently

In the past five days, Titagarh Rail Systems share price rallied 9.4%. In the last month, it is up 28.8%.

In 2024, so far its share price surged 30.7% and around 191.4% in the last year.

The stock touched its 52-week high of Rs 1,428.1 on 30 May 2024 and a 52-week low of Rs 346.7 on 31 May 2023.

About Titagarh Rail Systems

Titagarh Rail Systems incorporated in 1997, is mainly engaged in the manufacturing and selling of freight wagons, including semi high-speed trains, metros, passenger coaches, and propulsion equipment.

The company has been awarded prestigious orders by the Indian Railways for the manufacture and maintenance of Vande Bharat Trains under the Aatmanirbhar and Make in India initiatives of the government of India.

For more details about the company, you can have a look at Titagarh Rail Systems' factsheet and Titagarh Rail Systems' quarterly results on our website.

You can also compare Titagarh Rail Systems with its peers.

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