Titagarh Rail has received an 'Overweight' rating from Morgan Stanley as the brokerage believes that the company stands to benefit from Indian Railways' plan to procure 90,000 wagons by 2025.
Titagarh Rail's efforts to enhance its capacity for both freight and passenger segments will allow it to capitalize on these opportunities, said Morgan Stanley as it put a target price of Rs 1,337 on the stock.
Titagarh is also focusing on backward integration by producing forged wheels and sub-components for coaches. Additionally, it is expanding its capabilities in propulsion manufacturing, with an eye on targeting export markets.
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Titagarh Rail shares will also be on focus as the stock trades ex-dividend. The company's board of directors declared a final dividend of Rs 0.80 or 40 percent per equity share with a face value of Rs 2 for the financial year ended March 31, 2024, It fixed August 20, 2024 as the record date to determine the eligibility of the shareholders for this corporate action.
The company, which is into manufacturing of railway wagons, informed exchanges that the dividend is subject to the shareholders' approval. A decision regarding the dividend payment date will likely be taken during the 27th Annual General Meeting (AGM) of Titagarh Rail Systems scheduled for August 27.
In the previous session, Titagarh Rail shares ended 3.26 percent higher at Rs 1,474.50 on the National Stock Exchange (NSE). In the last one year, the stock has surged around 114 percent, more than doubling investors' money. In comparison, benchmark Nifty's rose 25 percent during this period.
Domestic brokerage Nuvama has a 'buy' call on the stock with a target price of Rs 1,988 per share. The company is well entrenched in the wagon segment having beefed up the business in its near two decade journey.
While low wagon orders in the past few years hurt the firm, it remains well placed to benefit from rising demand for custom-made wagons post-commissioning of DFC, the brokerage noted.
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In order to reduce dependence on the wagon segment, Titagrah Rail has ventured into the fast-growing coach segment. The acquisition of Firema enabled the company to tap the growing Metro rail business. Cimmco fortified its presence in the high-potential defence segment, which is likely to provide a fillip to order inflows, going ahead, said Nuvama.
The company faces risks from potential margin pressure due to predatory pricing from new entrants in the increasingly competitive wagon industry. Additionally, its overseas acquisitions, such as AFR and Firema in Europe, could face financial challenges due to the region's economic slowdown.
Moreover, any new business ventures requiring additional capital may strain Titagarh Rail's balance sheet, according to analysts.
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