ICICI Direct has come out with its report on Rail Vikas Nigam. The research firm has recommended to "Subscribe" the IPO in its research report as on March 28, 2019
Incorporated in 2003, Rail Vikas Nigam (RVNL) is a project executing agency working for and on behalf of the Ministry of Railways (MoR). The company executes all types of railway projects including new lines, doubling, gauge conversion, railway electrification, metro projects, major bridges, construction of cable stayed bridges, institution buildings, etc. The company's project scope involves full cycle of project development i.e. from conceptualisation to commissioning including design, preparation of estimates, calling and awarding contracts, project & contract management etc. As on December 2018, RVNL has an order book of | 77,504 crore.
Valuation and Outlook
RVNL currently has an order backlog of | 77,500 crore. The management says ~| 30,000 crore worth orders are long gestation projects with execution timeline at five to seven years. Orders of ~| 45,000 crore are related to doubling, new lines, etc, where execution timelines are two to three years. These provide near-medium term revenue visibility for RVNL (refer Exhibit 3).
At the IPO price band of | 17-19, the stock is available at a price to earnings multiple of 7x while comparable peers are trading at an average multiple of 6.6-12.7x. The company has a robust balance sheet and is available at an attractive dividend yield of ~4%. Backed by a solid order backlog and strong execution capabilities, we recommend SUBSCRIBE to the issue at the offer price.
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