Railway stocks rally on contract wins: Ircon, RailTel, Rail Vikas among top gainers; Analysts see selective short-term opportunities

Railway equities experienced a significant uptick on Monday, driven by numerous contract wins and government capital expenditure initiatives.Ircon International saw a 6.8% rise, whilst RailTel Corporation of India increased by 6.5%. Rail Vikas Nigam and Jupiter Wagons rose by 2.8% and 2.5% respectively, with Titagarh Rail Systems and Indian Railway Finance Corporation showing gains of nearly 2%.Market specialists indicated potential gains of up to 25% in the short term, whilst advising selective investment due to current valuations. “Railway stocks have been underperforming for over a year, and the recent Rs 77,000-crore capex announcement coupled with the inauguration of the Bairabi-Sairang railway line in Mizoram and projects worth Rs 8,500 crore in Manipur, boosted sentiment,” said Vipin Kumar, AVP Equity Research & PMS (Derivatives & Technical Analyst), Globe Capital Market, as quoted by Economic Times.

Most railway stocks declined between 15% and 37% over the previous year. However, recent contract wins and policy-driven capital expenditure signals have resulted in increases of up to 12% in the past five sessions. RailTel received a Letter of Award valued at approximately Rs 210 crore for the Bihar Education Project on September 13.Rail Vikas Nigam secured the lowest bid position for a Rs 169-crore traction sub-station project from West Central Railway, whilst Jupiter Wagons’ subsidiary obtained a Rs 113-crore order for 9,000 LHB axles from the Railways Ministry. “The outlook is constructive, with visible order flows, ongoing tendering activity and continued policy push expected to sustain investor interest,” said Om Ghawalkar, market analyst, Share.MarketValuations vary amongst public-sector undertakings (PSUs) and private entities. Despite positive short-term indicators, some stocks may experience consolidation periods due to elevated prices in certain market segments.Rail Vikas Nigam and Titagarh Rail Systems maintain PE ratios of approximately 50 times earnings, whilst IRCON, RITES and IRFC range between 20-30 times. RailTel trades in the mid-to high 30s.Texmaco and Jupiter Wagons hold higher valuations, supported by localisation opportunities in wheels, axles and wagons. Kumar projected potential gains of 20-25% over six to twelve months, whilst emphasising selective investment. “The valuations have turned reasonable in railway stocks,” said Kumar. “Titagarh Rail Systems, RailTel Corporation, Ircon International and Rail Vikas Nigam are some of the stock picks.“(Disclaimer: Recommendations and views on the stock market and other asset classes given by experts are their own. These opinions do not represent the views of The Times of India)