Titagarh Rail Systems stock spikes over 9% to 5-month high on stellar performance in Q4

Titagarh Rail Systems, one of India's leading freight wagon manufacturers, experienced a significant surge of nearly 9.4% in its intraday share value, reaching a five-month peak of ₹1217 per share. 

This surge followed the company's announcement of robust financial performance for the March quarter and the entire fiscal year FY 24, marked by record-breaking revenue and net profit figures.

In its post-market hours report on Wednesday, Titagarh Rail Systems reported a 64% increase in its consolidated net profit to ₹79 crore for the March quarter, compared to ₹48 crore in the corresponding period last year. Revenue from operations for the fourth quarter of FY 24 also climbed by 8% to ₹1,052.4 crore, up from ₹974.2 crore in the previous year's quarter.

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For the full fiscal year FY 24, the company achieved impressive growth, with revenue surging by 38.59% year-over-year to ₹3,853 crore, and net profit soaring by 126% year-over-year to a record high of ₹286 crore.

The performance of railway-related companies is remarkable, driven by increased capital expenditure by the Indian government, which has spurred significant order inflows. This trend has encouraged investors to incorporate railway stocks into their portfolios, leading to strong demand and a notable surge in these stocks in recent years.

In the calendar year 2023 alone, the company's shares delivered an extraordinary return of 367%. Looking back at previous years, the stock recorded notable gains of 140.27%, 60%, and 19% in the calendar years 2022, 2021, and 2020, respectively. Over the past five years, investors have seen remarkable returns of 2185% on their investments in Titagarh Rail Systems.

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In the current year so far, the company shares have jumped 14%. Despite the stock's impressive performance, global brokerage firm Morgan Stanley believes there is still significant potential for further growth. In a recent note, the brokerage initiated coverage on the stock with an 'Overweight' rating and set a target price of ₹1,285 per share.

Morgan Stanley identifies Titagarh's passenger coach business as a new growth driver, noting that the market has yet to fully appreciate its earnings potential. The brokerage anticipates this growth to be driven by the introduction of new products such as Vande Bharat, Amrit Bharat, and bullet trains, alongside increasing demand for metro projects.

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Morgan Stanley projects a robust 28% earnings compound annual growth rate (CAGR) between FY24 and FY27, driven by the execution of order backlogs within both the freight and passenger businesses. 

Additionally, it expects the company to benefit from backward integration initiatives, including the production of the propulsion system (under licence from ABB) and the manufacture of forged wheel sets through a joint venture with Ramkrishna Forgings.

Titagarh Rail Systems stands out in India as the only company equipped with the technology and capability to produce both stainless steel and aluminium metro coaches. With tier-I and tier-II cities increasingly adopting metro systems as the preferred urban rapid transport system, metro coaches present a significant growth opportunity for the company.

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Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.