Buy Texmaco Rail and Engineering; target of Rs 140: Edelweiss

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26 Aug, 2025 12:21

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Edelweiss' research report on Texmaco Rail & Engineering

Texmaco Rail & Engineering’s (Texmaco) Q2FY18 revenue plummeted 49% YoY as GST uncertainty impacted execution in the EPC arm; in addition, lack of wagon orders led to wagon revenue sustaining tepid trend. EBITDA margin fell to 0.1% versus 5.0% in Q2FY17 due to operating de-leverage. Texmaco Group’s order book at Q2FY18 end stood at ~INR36bn; the upcoming Indian Railways’ (IR) tender for 9,500 wagons and rising opportunities in coaches, locomotives & EPC segments are expected to result in substantial order inflows for the company. We expect order intake to drive stock performance going ahead. Maintain ‘BUY’ with SOTP-based target price of INR140.

Outlook

Burgeoning investments in IR (“Indian Railways - Re-birth of the Colossus”) entail bright prospects for Texmaco’s primary business lines—wagons, coaches, locomotives and rail EPC. We believe, rising exposure to rail EPC business will materially change the company’s risk profile, pruning its dependence on the wagon segment. Moreover, the proposed amalgamation with Bright Power will enable Texmaco to become a ‘total rail solution provider’. Our SOTP value for Texmaco works out to INR140, based on P/E of 25x FY19E earnings of Texmaco and Bright Power. We maintain ‘BUY’ recommendation.

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