Why RVNL Share Price is Rising

Rail Vikas Limited (RVNL) share price has a knack for keeping investors on their toes. After a stellar run that saw its share price skyrocket 1,234% in the past five years, things seemed to cool off in February.

But for those who wrote RVNL off too soon, the past few days have served as a sharp reminder of its potential. The stock has clawed its way back into the spotlight, experiencing a red-hot surge of 23.5%. This impressive jump adds to the already significant gains of 87.7% witnessed in 2024 so far.

The question on everyone's mind - is this just a temporary blip, or the start of another epic rally for RVNL? Let's explore the factors fueling this recent rise and delve into what the future might hold for this dynamic railway stock.

#1 Huge Order Win

RVNL share price hit an all-time high price earlier this week on 21 May 2024 after it announced that it has received a letter of acceptance from the Kahragpur division of Southeastern Railway.

The order entails upgrading the electric traction system from 1x25 KV to 2x25 KV for the Kharagpur Bhadrak section to meet a 3,000 MT loading target.

The scope of the project involves the all phases of developing of the new system, including design, supply, erection, testing, and commissioning. The order value of the contract is more than Rs 1.5 billion (bn) and it expected to be completed within 18 months.

#2 Strong Quarterly Earnings

Apart from the mega order win, strong quarterly earnings also supported the positive sentiment in RVNL shares.

For Q4FY24, RVNL's net profit surged 33.2% year-on-year (YoY) to Rs 4.8 bn, compared to Rs 3.6 bn in the same period last year.

This growth was driven by higher revenue and improving operations.

The company's revenue came in at Rs 67.1 bn, a growth of 18.8% on a YoY basis.

The earnings before interest tax depreciation and amortization (EBITDA) stood at Rs 4.6 bn. This is 21.8% higher on a YoY basis driving the earnings performance.

For FY24, the board also recommended a final dividend of 21.1% amounting to Rs 2.11 per share.

In its latest earnings presentation, the company mentioned that its order book currently stands at around Rs 850 bn.

What Next?

It seems like RVNL will continue to be a stock market darling in the near future. On one hand RVNL's strong financial performance and dividend yield is lifting sentiments, and on the other hand, rising order flows are improving forward earnings outlook.

RVNL has ambitious plans for FY25, targeting a topline of over Rs 230 bn and a bottomline of Rs 16-17 bn. It also aims to significantly expand its order book to Rs 1,000 bn. To achieve this ambition, it expects to win orders between Rs 200 bn to Rs 250 bn.

Furthermore, global expansion is a key focus, with aspirations of entering 4-5 new countries. In fact, it has already been shortlisted for significant projects in Botswana and Namibia, both valued around Rs 20 bn each.

To facilitate further international growth, they have established offices in South Africa, Oman, UAE, and the Maldives. The company aims to bag more and more overseas orders.

Now, the company is also focusing on various segments with the efficiency of the private sector and the authority and trustworthiness of the public sector. RVNL is demonstrating a particular focus on the metro segment in both domestic and international markets.

The Indore metro project is progressing rapidly, and the Chennai metro project spans approximately 10 km with nine stations. To expand its involvement, RVNL is participating in a depot tender in Surat and has been shortlisted for the Mauritius metro project.

The newly formed business development section is helping RVNL expand into new markets.

The company is known for its flexibility and short reaction time, which has contributed to a positive public impression and an increased presence in market price. Its strong financials, ambitious FY25 targets, and global expansion plans position it for continued growth.

However, achieving these aggressive goals requires securing a large volume of new orders and navigating potential execution challenges in new international markets. Investors should monitor progress towards these goals and the company's ability to overcome expansion hurdles.

How RVNL Share Price has Performed Recently

In the past five days, RVNL share price rallied more than 23%. In 2024 so far, it is up 87.5%.

The stock surged 104% in the past six months and around 202% in the year gone by.

The stock touched its 52-week high of Rs 158.3 on 22 May 2024 and a 52-week low of Rs 110.5 on 31 May 2023.

About Rail Vikas Nigam

Rail Vikas Nigam Limited is an Indian public sector undertaking which works as the construction arm of the Ministry of Railways for project implementation and transportation infrastructure development.

It was incorporated in 2003 to meet the country's surging infrastructural requirements and to implement projects on a fast-track basis. It's a category-I Miniratna public sector undertaking (PSU) under the administrative control of the Indian Ministry of Railways.

For more details, see the Rail Vikas Nigam 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...