Despite a persistent downtrend in railway stocks following the budget announcement, IDBI Capital analysts suggest that IRCON and RVNL could exhibit resilience amidst the current market conditions.
IDBI Capital’s Railway Analysis: Led by Vishal Periwal, the analyst team at IDBI Capital maintains a “hold” rating for RVNL, while increasing the target price to ₹248. However, they downgraded IRCON from “buy” to “hold,” setting a price target of ₹216.
Analyzing the Railway Sector: The analysts noted RVNL’s weak performance in the December quarter, with both revenue and net profits declining by 6% year-on-year. Despite this, the company has maintained consistent order inflow, with the brokerage highlighting an inflow of ₹1,700 crore for the quarter. Moreover, they emphasized the improved diversification of order wins across sectors, including railways, metro, irrigation, power, and roads.
Conversely, IRCON demonstrated a robust quarter, with strong revenue and consistent order execution. However, the analysts expressed concerns over lukewarm order wins, coupled with the recent surge in IRCON’s share price, which led to a rating downgrade due to perceived overvaluation.
Market Reaction: On Monday, IRCON’s share price dropped by 8.21%, trading at ₹204.10, while RVNL’s share price decreased by 9% to ₹235.30.
Despite the ongoing challenges in the railway sector, IDBI Capital’s analysis suggests that holding positions in RVNL and IRCON could be prudent, considering their respective performances and potential resilience amidst market fluctuations.
