Helping You Build Wealth With Honest Research
Since 1996. Try Now

MEMBER'S LOGINX

     
Invalid Username / Password
   
     
   
     
 
Invalid Captcha
   
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Investment in securities market are subject to market risks. Read all the related documents carefully before investing

An Emerging Opportunity for Investors
India's Lithium Megatrend




**Important: We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
**By submitting your email address, you also sign up for Profit Hunter, a daily newsletter from Equitymaster
covering exciting investing ideas and opportunities in India.


AD

Why Texmaco Rail Share Price is Rising

Oct 16, 2023

Why Texmaco Rail Share Price is Rising

Indian share markets slipped into negative territory on Friday last week despite some intraday recovery.

Despite the fall on Friday, Sensex and Nifty logged weekly gains of nearly 0.5% each due to a relief rally earlier in the week, on easing US bond yields.

As many as 50 smallcap stocks logged a double-digit rise in their stock prices - in the range of 12-40% last week despite geopolitical concerns arising on the Israel-Hamas conflict.

Continuing this trend in the smallcap space, Texmaco Rail & Engineering shares saw a rally of over 11% on Monday.

Here's why.

#1 Strong Q2 Results

During the September 2023 quarter, Texmaco Rail witnessed a substantial 64% YoY increase in its consolidated total income, reaching Rs 8.1 bn. The company's consolidated revenue from operations also exhibited a robust growth of 66% YoY, amounting to Rs 8 bn.

Breaking it down into segments, the heavy engineering division made the most significant contribution to the company's overall revenues. Gross revenue from this segment skyrocketed more than threefold, reaching Rs 6.2 bn in Q2FY24, compared to Rs 1.9 bn in the same period last year.

Additionally, the steel foundry division displayed strong performance with a 64% YoY increase in gross revenue, reaching Rs 2 bn in Q2FY24.

However, the infrastructure segment, which includes the rail & green energy division and electrical division, reported negative gross revenue performance. The rail & green energy segment experienced a 26% YoY decline in gross revenue, while the electrical segment saw a 39% drop.

The company reported a 70% YoY rise in net profit to Rs 200 million (m) in the quarter.

Looking at the first half of FY24, the company achieved a remarkable revenue of Rs 14.6 bn, marking an impressive 86% surge compared to Rs 7.8 bn in the same period last year.

Texmaco Rail & Engineering also turned the tables on its financial performance, reporting a consolidated net profit of Rs 372.8 m for H1FY24, a significant improvement from the net loss of Rs 52.2 m in H1FY23.

As a result of this stellar performance, Texmaco Rail & Engineering's shares surged by 11.7% in early trade today, reaching Rs 148.95 per share.

#2 Fund Raising Plan

During its meeting on 15 September 2023, the board of directors gave the green light to a plan for raising funds, with an allocation of up to Rs 10 bn.

It would be achieved through the issuance of equity shares via a qualified institutions placement (QIP), contingent upon approval from the company's shareholders and the acquisition of any necessary regulatory or statutory approvals.

Additionally, the board also authorized the collection of funds through the issuance of equity shares to the promoter(s) or promoter group, with an upper limit of Rs 500 m.

In a strategic move made in August 2023, the company forged a partnership with Hindalco Industries aimed at producing aluminium, rail wagons, and coaches.

Hindalco will provide profiles, sheets and plates of its unique aluminium alloys, along with fabrication and welding expertise. Texmaco will bring in technical expertise and be responsible for design, setting up the factory production line, and providing skilled workers.

What Next?

Going forward, the company is poised for a 25-30% production increase, underscoring its dedication to fulfilling market demands and leveraging emerging opportunities.

In the upcoming budget, the railways have reportedly sought a gross budgetary support of Rs 1.5-1.8 trillion (tn) over the Rs 1.37 tn figure earmarked during Budget 2022-23.

The allocation could be the highest ever with the likely announcement of around 300-400 new Vande Bharat trains.

Part of the said allocation could also be used towards building new tracks, given the railways' ambitious plan to lay about 100,000 km of new tracks over the next 20-25 years.

With so many triggers for growth, railway stocks could see their share prices rise considerably over the near term.

Further, it is also exploring opportunities in related domains such as the 'Modern Train Communication System' and 'Kavach'.

How Texmaco Rail Shares Have Performed Recently

In the past six months, shares of the company have rallied over 205%.

On a year-to-date basis, Texmaco Rail has surged 140%, while in the past five days, shares are up 12%.

The company touched its 52-week high of Rs 163.8 on 11 September 2023 and its 52-week low of Rs 40.6 on 29 March 2023.

chart

About Texmaco Rail

Texmaco Rail & Engineering is among India's leading freight car manufacturers, and diversified engineering companies.

The company is the largest supplier of wagons to the Indian Railways in India, with strong in-house capabilities for designing special purpose wagons for core sectors such as cement, coal, alumina, chemicals fertilisers, thermal power projects, and much more.

It also manufactures sugar mill machinery, industrial boilers, cryogenic and pressure vessels, chemical plant equipment, and agro-machinery such as power tillers.

The company's major operating divisions are the heavy engineering division, consisting of wagon hydro-mechanical equipment and process equipment manufacturing facilities, and the steel foundry division.

They have five manufacturing facilities on the outskirts of Kolkata in Agarpara, Belgharia, Sodepur, and Panihati.

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

You can compare Texmaco Rail with its peers:

Texmaco Rail vs Titagarh Railsysytems

Investment in securities market are subject to market risks. Read all the related documents carefully before investing

Safe Stocks to Ride India's Lithium Megatrend

Lithium is the new oil. It is the key component of electric batteries.

There is a huge demand for electric batteries coming from the EV industry, large data centres, telecom companies, railways, power grid companies, and many other places.

So, in the coming years and decades, we could possibly see a sharp rally in the stocks of electric battery making companies.

If you're an investor, then you simply cannot ignore this opportunity.

Click Here for Full Details

Details of our SEBI Research Analyst registration are mentioned on our website - www.equitymaster.com

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...

Equitymaster requests your view! Post a comment on "Why Texmaco Rail Share Price is Rising". Click here!