Why RVNL Share Price is Rising

Yesterday, we wrote about IRFC and why the railway financing company's stock price was rallying non-stop.

Adding to the list of railway stocks that have seen a sharp rally, Rail Vikas Nigam (RVNL) has started to show extra bullish momentum after a period of underperformance between September and December 2023.

RVNL share price has rallied over 25% in the past five days.

Let's find out the reasons behind the recent bullish sentiment.

Why RVNL Share is Rising in 2024

#1 RVNL Emerges as Lowest Bidder

The recent optimism comes from the fact that RVNL has emerged as the lowest bidder for a Rs 2.5 billion (bn) power transmission project in Jabalpur.

The contract was awarded by M.P. Madhya Kshetra Vidyut Vitaran and is to be completed in the next two years.

To put things into context, this is not the only order that RVNL has bagged in recent weeks. In January 2024, a joint venture between RVNL and KRDCL secured the approval for a significant upgrade of Varkala Sivagiri railway station.

Prior to that in December 2023, another joint venture between RVNL and URC emerged as the lowest bidder for part design and construction of an elevated viaduct, five elevated metro rail stations and ramp for the Indore Metro Rail Project.

The thing about railway companies is that every order wins these days is rewarded with an upper circuit or rating expansion. The sentiment is so strong surrounding the railway and infra sector overall.

#2 Long Term Growth Plans Spark Optimism

The other reason why RVNL shares are rising is because the company recently laid out a strong growth plan for the next five years.

Power financing company REC recently entered into an MoU with RVNL to finance up to Rs 350 bn worth of infrastructure projects to be executed by RVNL over the next five years.

These projects constitute but are not limited to multi-modal logistics hub projects, rail infrastructure projects, road, port, and metro projects.

RVNL currently caters to about 30% of the infrastructure requirements of Indian Railways and has also pioneered the implementation of large infrastructure projects under the PPP model.

#3 Optimism Ahead of Budget 2024 Announcements

The other reason why railway stocks have rallied is on the hopes of positive announcements in upcoming Budget 2024.

The Indian government declaring fresh infusion for the development of railway infrastructure and expectations of strong Q3 results by railway companies has fuelled the optimism.

What Next?

This massive investment in new trains by the Indian Railways bodes well for Rail Vikas Nigam.

This is because, RVNL acts as a crucial executing agency for various Indian Railway projects, focusing on new lines, station redevelopment, and other developmental initiatives.

The company was awarded the Navratna status in May last year, paving the way for higher autonomy concerning projects, capital expenditure, international ventures and attracting superior talent.

Going forward, the company's margins could improve as the huge order book gets executed.

How RVNL Share Price has Performed Recently

In the past five days, RVNL share price has gained 25%. Today, the stock opened 1% higher but quickly extended gains to rise 4% and touch a new high of Rs 231.8.

In the past one year, RVNL share price has gained 200%.

Since listing in April 2019, the stock has shot up by more than 11x!

Here's a table comparing RVNL with its peers -

Comparative Analysis

Company	RVNL	Kalpataru Projects	KEC International	NCC
ROE (%)	20.8	9.7	4.8	11.1
ROCE (%)	17.8	15.4	12.2	19.9
Latest EPS (Rs)	7.1	29.4	7.3	9.6
TTM PE (x)	31.1	24.8	84.8	20.4
TTM Price to book (x)	5.8	2.5	4.2	1.9
Dividend yield (%)	0.9	1	0.5	1.1
Industry PE	51.9
Industry PB	5.5

Data Source: Ace Equity

About RVNL

RVNL is engaged in the business of implementing various types of rail infrastructure projects assigned by Ministry of Railways.

While not the sole player in the market, RVNL holds a significant position due to its strong government backing, expertise in project management, and track record of successful project completion.

For more details, see the Rail Vikas Nigam company fact sheet and quarterly results.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...