Rail Vikas Nigam Ltd: How high can this railway stock fly?
₹1 trillion mark. The stock has delivered staggering 30-fold returns since its listing in 2019. Is this steep rise justified? To answer that we first need to understand RVNL’s business model.
The central public sector undertaking serves as the construction arm of the railways ministry, so it must be evaluated on parameters such as order book and Ebitda margin, like any other engineering, procurement and construction (EPC) company. Nearly 60% of its ₹85,000 crore order book is from nominated orders or those from the government since it’s a public company dedicated to laying new railway lines, gauge conversion, and so on. The remaining orders are from winning bids for metro projects and non-railway projects such as highways, irrigation and power.
The company has strong revenue visibility – the size of the order book is four times of its FY24 revenue. Also read: JSW Energy banks on increased capacity and government’s renewables push According to management, the June quarter (Q1) is typically weak for RVNL. Revenue recognition in accounts picks up after a certain threshold is achieved on project execution, so it’s better to focus on annual performance.
Q1FY25 numbers were adversely affected by various approval delays in the Indore and Kolkata metro rail projects owing to the general elections. Revenue fell by 25% year-on-year to ₹4,064 crore and Ebitda by 50% to ₹176 crore. The Ebitda margin contracted to 4.3%, from 6.4% in Q1FY24.
Despite the drop in revenue, management has guided for flattish revenue in FY25 at about ₹22,000 crore. The Ebitda margin trajectory is difficult to predict as the margin in non-nominated projects could be different from the fixed margin of around 5% for nominated projects. The company wants to
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