Titagarh Rail Systems scales fresh lifetime high: Three reasons why the stock will rally further

Titagarh Rail Systems, formerly known as Titagarh Wagons, hit a fresh lifetime high of Rs 449.95 on the BSE in the early morning deals on June 19. The stock, which has been on a rising spree for the last many sessions, jumped around 6 per cent to hit a fresh all-time high level. Antique Broking has initiated coverage on the stock with a buy rating and a target price of Rs 694.    

As per a Zee Business Research report, the company is expected to touch Rs 14,000 crore in income in the next 5–6 years. It is estimated that the passenger rail systems (PRS) segment will fetch an income of Rs 9,000 crore, while the FRS unit is estimated to yield Rs 5,000 crore. There is a possibility of a 53 per cent compound annual growth rate (CAGR) in the company's earnings between FY23-FY26E. Further, considering the forward P/E estimates of 12 times for FY25, the stock is still cheap, note analysts.

Other railway stocks, too, were on fire in trade. For instance, Texmaco Rail rallied nearly 6 per cent to Rs 70.30 on the BSE. Rail Vikas Nigam was up over 1 per cent higher at Rs 124.40. BEML was up 1.48 per cent. IRFC was up 0.18 per cent at Rs 33 on the BSE.

Here're three reasons why Titagarh Rail is expected to rise further:

Passenger Rail Systems

The company plans to increase the wagon manufacturing capacity in the next two years from 240 units per year to 840 units. The company is building coaches for Bengaluru and Pune. Besides, the company, along with BHEL, has received an order to manufacture 80 Vande Bharat trains. Further, the company is expected to win tenders for metros in Ahmedabad and Surat.

Market leader in wagon manufacturing

The company plans to increase the wagon manufacturing capacity in FY24 to 12,000 per year from 8,400 units per year. It is the country's biggest wagon manufacturer, with 30–35 per cent of the market share.

Focus on propulsion system and wheel

As per analysts, the development of propulsion systems in the passenger segment is expected to aid growth in a big way. Additionally, the company has plans to install 2,00,000 wheels per year, in a joint venture with RK Forgings. These aside, the company has won an order to supply 1540000 wheels in the next 20 years. 

Titagarh Rail Systems' share price

The stock has zoomed 379 per cent in the last 12-month period, Trendlyne data show. In comparison, the benchmark Nifty50 has risen 22 per cent during the window.