After witnessing a bumpy ride in the past decade, railway wagon makers may be in for better times with Indian Railways, the sole customer, likely to increase orders this year. The plan outlay for 2018-19 may be hiked to the highest ever at Rs 1.47 lakh cr with commissioning of4000 km of new lines and electrification of 8000 km.
Railways is likely to buy 13000 wagons this year even as there were reports last month that bids for 9500 wagons may be scrapped due to lack of transparency in tendering process. Railways are expected to place orders for 600 locomotives and 5000 passenger coaches.
Amidst the positive sentiments ahead of Union Budget, here is a look at three listed players in this segment.
#Titagarh Wagons Ltd (BSE: 532966, NSE:TWL) Category: Small Cap
Titagarh Wagons Ltd was established in 1997 with the prime objective of manufacturing wagons and associated products for the railways. Over the years it has expanded its reach with manufacturing facilities in India, Italy and France.
It sells passenger coaches under the brand name FIREMA. It designs wagons such as container flats, grain hoppers, cement wagons, clinker wagons, tank wagon under the French brand ArbelFauvet Rail. The venture is headed by Jagdish Prasad Chowdhary, Chairman and Umesh Chowdhary, Vice Chairman and Managing Director. It has diversified activities such as shipbuilding, defence, tractors and bailey bridge.
The company reported a net profit of Rs 19.28 cr in 2016-17 as against a loss of Rs 8.98 cr in 2015-16. Total income had risen to Rs394. 64 cr. With fluctuations and uncertainty about railway orders, the company has diversified operations de-risking from dependence on railways business. The company suffered a net loss of Rs 8.17 cr in September quarter while sales fell 8.76% to Rs 367.23 cr.
On a returns perspective, 36.2% quarterly and 47.56% half yearly is commendable while it does not perform well in financial ratios with return on equity of 2.78%, net profit margin of 1.56, also weak liquidity and cash flow ratios. Promoters hold 45.77% stake.
On technical charts, Relative Strength Index (RSI) of 53.70 is neutral to bullish while MACD has witnessed a cross over while ADX of 15 indicates range bound trading.
Target: 182 Duration: 4 Weeks
#Texmaco Rail and Engineering Ltd (BSE: 533326, NSE: TEXRAIL) Category: Mid Cap
Texmaco Rail and Engineering is based in Kolkata with diversified activities in engineering and founded in 1938 by industrialist KK Birla and is the flag ship company of the Adventz Group. It manufactures a diverse range of products including railway freight cars, hydro-mechanical equipment, steel casting, pressure vessels. It is a leading supplier of wagons to Indian Railways. The company is headed by SK Poddar.
The company has also achieved inorganic growth through acquisitions-Kalindee Rail Nirman (Engineers) Ltd and Bright Power Projects India Pvt Ltd giving strength to the group in track work, signalling and railway electrification. The company had also successfully completed the fabrication and erection of the Bhairab Bridge in Bangladesh over river Meghna, an engineering marvel.
In 2016-17, the company reported a net profit of Rs 33.57 cr as against Rs 27.20 cr the previous year. Revenue rose to Rs 1235.08 cr as against Rs 1175.84 cr the previous year.
The company reported a net loss of Rs 8.30 cr and 18.66% fall in sales at Rs 191.92 cr in September quarter. On returns perspective, 4.34% monthly, 13.46% quarterly and 21.68% half yearly is commendable. It doesn’t fare well on financial ratios with return on equity of 2.61%, assets of 1.65%, net profit margin of 1.98%, and not so favourable liquidity ratios but better cash flow ratios.
On technical charts RSI of49.90 is neutral while MACD has witnessed a bullish crossover indicating a buy signal and ADX of 17.73 indicates range bound trading.
#CIMMCO Ltd ( BSE:505230, NSE: CIMMCO) Category: Small Cap
Established in 1957 and a subsidiary of Titgarh Wagons Ltd, the primary business of Cimmco Ltd is manufacturing of railway wagons and heavy engineering projects at Bharatpur (Rajasthan). The company has the following divisions- wagon manufacturing, engineering and project division, hydro mechanical division and specialised products division.
The company had received good orders from Indian railways in 2016-17 but increased finance costs led to a loss of Rs 10.54 cr, an improvement over Rs 13.64 cr reported the earlier year. The company became a subsidiary of Titagarh Wagons Ltd and is looking at defence projects by way of diversification and lessening the dependence on railway orders. Sales turn over rose to Rs 122.81 cr as against Rs 68.70 cr the previous year.
The company suffered a net loss of Rs 62 lakh in September quarter while sales rose 8.41% to Rs44.85 cr.
On technical charts, RSI of 52 indicates bullishness, MACD has witnessed a bearish crossover and ADX of 17.84 indicates range bound trading.
Target : Nil
Railway wagon manufacturing companies were hit hard in the last ten years due to fluctuation in orders from Indian Railways. The main reasons for the sluggish growth in wagon industry were network congestion and under-investment by Indian Railways. Consequently, most of them started diversifying into related areas.
For eg. Texmaco has positioned itself as a total solution provider by getting into service driven EPC business of track laying, signalling, rail telecom and overhead electrification. Dedicated Freight Corridors (DFC) are to be commissioned by 2019 that will enable freight trains to run at 100 kmph with substantial increase in pay load.Titagarh has also diversified into shipbuilding, defence and tractors and also globalised their business. This augurs well for wagon industry.
Investors are looking forward to the Union Budget 2018-19 for announcements regarding capital expenditure on railways. News reports indicate that electrification will be given top priority and commissioning of new rail tracks. Diesel locomotives are likely to be phased out.
Lack of orders have caused hardships for state owned wagon maker Burn Standard which is planning to put up its land on sale to clear Rs 100 cr dues to bank. Other unlisted companies affected by lack of orders was Braithwaite and Jessop.
The sector looks promising considering the diversification strategies and more rail orders expected this year.