Morgan Stanley initiates coverage on this multibagger railway infra stock; stocks zooms over 6%

Titagarh Rail Systems in Tuesday’s trade (May 7, 2024) zoomed up to 6.28 per cent in early morning deal to Rs 1099.7 after global brokerage Morgan Stanley initiated an ‘overweight’ view on the stock with a target price of Rs 1285. The set target by the brokerage implies a potential upside of over 24 per cent. The brokerage sees strong evidence of a revival in the country’s railways, & is of the view that Titagarh is a large beneficiary.

At 9:21 am, the stock traded with gains of over 5 per cent at Rs 1088.5 apiece on the BSE.

Morgan Stanley believes the freight segment will turn out to be the cash cow for the company while the passenger business will likely be the new growth engine. Over FY24-27, the brokerage expects a strong 28 per cent earnings CAGR. The brokerage added that the company can also drive exports growth through low-cost local manufacturing. Given the strong earnings visibility and improving return ratios, the brokerage has valued the stock at 35x FY26 PE which it deems fair.

The stock trades at relatively cheap valuation with trailing twelve month (TTM) price to earnings of 54.5, which is below the industry median.

The stock research platform Trendlyne shows that the consensus recommendation on the stock from 5 analysts is a 'strong buy', with a 1-year target pegged at Rs 1,244, signifying potential gains of 20 per cent from the last close.

Over the last year, the stock has delivered multibagger returns of 201 per cent, while on the year-to-date basis, it has underperformed with a negative return of 1 per cent.

Titagarh Rail Systems, formerly Titagarh Wagons, supplies passenger rolling stock including metro coaches. 

Mr. Atul Parakh, CEO of Bigul on the stock said that the company going ahead should see stronger wagon demand as rail freight share increases in the modal mix. Further, Titagarh will be a big beneficiary of the rail theme as it specialises in the design, manufacture, supply, commissioning and servicing of various types of rolling stock and metro coaches. The company’s earnings visibility has been improving, driven by policy initiatives such as 'AtmaNirbhar Bharat' and Make in India, the expert added.