BlackRock-backed railway stock with ₹600 Cr CAPEX plan to keep on your radar

The shares of a leading comprehensive mobility solution provider with a strong presence in India and Italy moved up by around 2 percent on BSE to Rs. 831.15 on Friday. 

Stock Performance

With a market capitalisation of Rs. 10,725.4 crores, the shares of Titagarh Rail Systems Limited closed in the red at Rs. 796.4, as against its previous closing price of Rs. 815.65. The stock hit its 52-week high at Rs. 1,896.5 on 27th June, and compared to Friday’s closing price of Rs. 796.4, the stock is trading at a discount of nearly 58 percent. The stock has delivered negative returns of nearly 13 percent over a one-year period, while around 14 percent of positive returns in the last one month.

Market Share & New Business Verticals

The company holds a market share of 25-30 percent in the wagon manufacturing sector and is the only Indian company that manufactures both wagons and coaches. It has identified two key growth drivers: signalling and safety systems, and shipbuilding and maritime systems.

Signalling and safety systems have become a focus area due to significant government support, while the shipbuilding venture was relaunched following the stabilization of the passenger rail system business.

Order Book

As of December 2024, the company’s order book stood at Rs. 25,333 crores, with Rs. 12,007 crores from the company’s direct orders and Rs. 13,326 crores from its joint venture (JV). The order book includes approximately 13,689 wagons and 1,589 Metro and Vande Bharat coaches. Of the total Rs. 12,007 crores, Rs. 5,161 crores are attributed to orders for Freight Rolling Stocks, and Rs. 6,846 crores are for Passenger Rolling Stock.

Capacity Target & Margin Guidance

The company is targeting a production capacity of 1,000 wagons per month, or 3,000 wagons per quarter, with current production at approximately 800-900 wagons. Metro coach production is projected to reach 20 cars per month by Q4 FY26, with a long-term goal of 25 cars per month by FY27.

EBITDA margins for the quarter stood at around 10 percent, with a future target of 13-15 percent. Freight business margins are expected to remain between 11-12 percent, with potential for improvement through operating leverage. Additionally, the company anticipates increased capex in shipbuilding and maritime systems once business plans are finalized.

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Capex Plans

The production enhancement plan for Metro and Passenger Coaches is structured in three phases. Phase 1 was successfully executed in May 2024. Phase 2, scheduled for completion by March 2025, will focus on producing 25 mainline coaches (VB) per month. Phase 3, expected to be completed by March 2027, will increase the production capacity for both metro coaches and mainline coaches (VB) to 36 cars per month.

The propulsion strategy is divided into three phases. Phase 1 is set to be completed in March 2025, followed by Phase 2, which will be executed by March 2026. During Phase 2, the company aims to ramp up production to 200 traction motors per month, 32 converters per month, and introduce 750V DC for metro and Vande Bharat systems. 

Phase 3, to be completed by September 2027, will involve further capacity enhancements, with a fungible system for both motors and converters, producing 200 motors per month, 100 converters per month, and 25 kV AC for metro systems. Finally, in Phase 4, scheduled to be executed by September 2027, the company plans to set up an aluminium coach facility with flat packs. To support these production enhancements, the company has allocated an estimated capital expenditure (capex) of nearly Rs. 600 crores.

Shareholding Pattern

On June 26th, BlackRock Global Funds, one of the funds managed by BlackRock Inc., the world’s largest asset manager, purchased a 1.6 percent stake in Titagarh Rail through block deals. The acquisition involved purchasing 21.73 lakh equity shares at an average price of Rs. 1,618 per share, totalling Rs. 351.62 crores. Prior to this acquisition, BlackRock had no investments in Titagarh or any other Indian railway stocks.

As per the July 2024 shareholding pattern, the Promoters hold a 40.46 percent stake in the company, Foreign Institutional Investors (FII) hold a 19.56 percent stake, while Retail Investors and Domestic Institutional Investors (DII) hold a 25.83 percent and 14.13 percent stake in Titagarh, respectively.

Previous Updates

12th February: Titagarh Rail Systems has received a Letter of Acceptance (LOA) worth Rs. 537.11 crores from Ambuja Cements Limited and ACC Limited, group companies of Adani Cement Limited, to manufacture and supply 16 nos. of BCFCM Rakes Wagon with BVCM Wagon. The execution is scheduled to be completed between January 2026 to March 2027.

Financials

Titagarh Rail Systems reported a decline in its revenue from operations, showing a year-on-year decrease of around 5.5 percent from Rs. 955 crores in Q3 FY24 to Rs. 902 crores in Q3 FY25.

Similarly, its net profit decreased during the same period from Rs. 75  crores to Rs. 63 crores, indicating a decline of nearly 16 percent YoY. The company’s revenue from operations grew at a CAGR of around 36 percent between FY21 and FY24.

Key Financial Ratios:

In terms of key financial metrics, Titagarh Rail has a Return on Equity (RoE) of 18.1 percent and a return on capital employed (RoCE) of 25 percent. Additionally, the stock has a P/E ratio of 37.2, compared to the industry’s P/E ratio of 35.5, and its debt-to-equity ratio stands at 0.21.

About the Company:

Titagarh Rail Systems Limited is mainly engaged in the business of manufacturing and selling freight wagons, passenger coaches, metro trains, train electricals, steel castings, specialised equipment & bridges, ships, and more.

Written by Shivani Singh

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