Titagarh Rail Systems Ltd. Research Report

Titagarh Rail Systems established in 1997 is the second largest freight wagon manufacturer in India. Its servicing portfolio comprises of the business of manufacturing railway wagons, Bailey bridges, Heavy Earth Moving and Mining equipment, steel and SG iron castings of moderate to complex configuration etc., also has a niche fabrication business catering to civil construction and defense sectors; manufacture other products for the Indian defence establishment, such as special purpose wagons, shelters and other engineering equipment as an 'Industry Partner' to the Defence Research and Development Organization, Ministry of Defence ('DRDO'). The company operates with 4 manufacturing facilities, 4 center for excellence and one design center. It has Domestic manufacturing facilities for Wagons and Shipbuilding in Titagarh West Bengal,Steel Casting Divisions in Kolkata, West Bengal, Wagons and Heavy Engineering Division in Bharatpur, Rajasthan and for Metro Coaches, Train Electricals and Casting in Uttarpura. The company also have an international presence through its wholly owned Titagarh Firema an Italian manufacturer of passenger rolling stock. Company has steel foundry capacity of 30,000 MT, manufacturing capacity of 8400 wagons per year and Passenger Rail System capacity of 250 coaches per year. The current order book position of the company is Rs. 28212 Cr. as of September 2023 including the TRSL’s share of total order of ₹ 13,326 cr. to be executed through joint ventures/consortium partners. Company is the market leader in wagon manufacturing with 25-30% market share since FY20. Company’s ongoing projects include orders from Pune Metro, Bangalore Metro, Vande Bharat Trains, Surat Metro, Ahmedabad metro and other development orders for propulsion systems. Titagarh currently have 51% market share in total contract value of VandeBharat trains and 49% share in total contract value of Forged Wheels.

Fundamentals (FY22-23):

CMP	Rs. 966
52 - week high	Rs. 1,046.50
52 – week low	Rs. 177.00
Dividend % (consolidated)	-
ROE	13.51%
BVPS (Rs.)	75.89
Sales (Rs.)	935 cr.
Debt to Equity	0.26
P/E ratio	24.10
EPS (consolidated)	10.89
P/B ratio	3.25
Market Cap	12,459 Cr.
Face value	Rs. 2

 

  

 

Financial Results:

Company’s Net Sales was Rs 935.45 crore in September 2023 up 54.08%, Quarterly Net Profit at Rs. 70.59 crore in September 2023 up 46.42% and EBITDA stands at Rs. 121.86 crore in September 2023 up 70.96% as compared to March 2022. Company’s EPS has increased to Rs. 5.58 in September 2023 from Rs. 4.03 in September 2022.

 

Key Points:

1.  Titagarh Rail Systems has bagged a contract worth Rs 350 crore from Gujarat Metro Rail Corporation (GMRC) under the pact, TRSL will design and manufacture 30 standard gauge cars for Ahmedabad Metro Rail Phase-II Project.
2. ABB India and Titagarh Rail Systems has formed a strategic partnership for the supply of propulsion systems for metro rolling stock projects in India.
3. The company has also received Letter of Acceptance (LOA) from the Gujrat Metro Rail Corporation (GMRC), for design, manufacture, supply, testing, commissioning, and training of 72 numbers of standard gauge cars for Surat Metro Rail Phase-I and the order value of the project is about Rs 857 crore.
4. The consortium of your Company with Bharat Heavy Electricals Limited (BHEL) emerged as the 2nd Lowest Bidder (L2)  for Manufacturing cum Maintenance of Vande Bharat Trainsets including Up-gradation of the Government Manufacturing Units & Trainset Depots for 80 nos. Vande Bharat trainsets and comprehensive maintenance of the same for 35 years in the mega tender of Indian Railways.
5. The company has also bagged another mega order through its consortium with Ramkrishna Forgings Limited for Manufacturing and Supply of Forged Wheels at a newly established state-of-the-art manufacturing facility in India for forged wheel production and supply of approximately 1.6-million-wheel discs for different rolling stocks of Indian Railways over a period of 20 years at about 80,000 wheels per annum.
6. The company has also launched its maiden warship Fast Patrol Vessel, designed & manufactured in collaboration with GRSE, for the Indian Coast Guard.
7. The company has also launched an Ocean-Going Passenger & Cargo Ferry Vessel for the Cooperative Republic of Guyana marking a significant milestone of shipbuilding venture and that to into the export market meticulously constructed through collaborative efforts with GRSE.
8. The company has committed a capex of about Rs. 650 crore over the next two years on capacity/infrastructure building and with consistent focus on resource optimization as well as thrust on augmentation of execution of the orders practiced by the management.
9. In the Passenger Rail Systems segment (PRS) the company achieved a very important milestone along with its associate TFA by bagging the order for the Pune Metro Project making the first contract for design, development, manufacture, and supply of 34 trains of 3 coaches each for Pune Metro.
10. An agreement with Agenzia nazionale per l'attrazione degli Investimenti e lo sviluppo di impresa S.p.A a company/ agency owned by the Government of Italy was executed with the shareholders of TFA through its investment arm, Invitalia and Hawk Eye, a private equity firm based in UAE, have invested a total of €14.5 million as primary infusion into TFA resulting in their stake of 44% in the equity capital of TFA.
11. TFA was also awarded a framework contract valued at €732.54 million for 33 trainsets, in consortium (RTI) with the international company SKODA Transportation.
12. It also bagged its first contract for 70 carriages for a value of €138 million including the assignment of the service and maintenance business for an amount of €221.99 million (51% share) and making the total order book of €1,393.09 million.

In last 3 Years the stock gave a return of 1,977.94% as compared to the rise of Sensex and Nifty in the same period.

Company has been doing exceptionally well in its sector backed by the growth of Indian Railways. In recent years the railway network of India has been growing at a very fast pace with 452 projects of total 49323 km in different stages of planning / sanction / execution and currently being the fourth largest railway system in the world after US, Russia, and China. Even the government is very aggressive towards growth of Railways and it has already allocated the capex of Rs. 2.9 lakh crore for FY23-24 along with the plans of development of Logistics and Warehousing industry backed by the railway network of India. Apart from that the Government of India plans to launch another 400 Vande Bharat trains and 1000 mini-Vande Bharat trains in next 3-4 years, expansion of Regional Rapid Transit Systems up to 1,700 Km across 27 cities by 2025 and subsequently to 50 cities. On wagon and fright side the demand for wagon is expected to increase to 5.4 lakh wagons by FY31 from 3 lakh wagons in FY22 (incl. replacement) and for freight the Annual target is expected to increase from 1,500m tonnes to 3,000m tonnes by FY27 and 3,600m tonnes by FY30. The company is well poised to enjoy a sweeter spot in this transitional journey of India and looking at these even the Mutual funds and FII/FPIs have increased from 8.28% to 8.43% and 7.05% to 16.85% respectively in last quarter. Considering the growth of company, its market share in wagons manufacturing industry in  railways, good financial performance and huge order book position backed by government’s push towards development and upgradation of Indian Railways and connectivity the company is the best choice for investors to invest for long term period.

HET ZAVERI​

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