Railway sector stock Titagarh Rail Systems is in focus after its March quarter earnings. While the company faced pressure from a shrinking wagon order pipeline, growth in its passenger rail business continued to gather momentum.
Despite lowering its earnings estimates for the next two financial years, the brokerage Nuvama Institutional Equities has retained its ‘Buy’ rating on the stock and revised its target price to Rs 1,089. This indicates an upside potential of nearly 36% from the current market price.
According to the brokerage report, near-term challenges in wagon ordering may continue, but several large railway and metro projects could support the company’s long-term growth trajectory.
Let’s take a look at the key reasons why the brokerage house is bullish on this stock and the rationale behind it –
Why is the market focusing on wagon orders?
One of the biggest concerns highlighted by Nuvama is the slowdown in wagon-related business.
Titagarh Rail Systems reported a 14% year-on-year decline in revenue and a 53% drop in profit after tax during the March quarter.
As per Nuvama report, a declining wagon order book significantly affected production volumes and revenue generation.
Wagon production stood at around 1,700 units during the quarter, compared to 2,455 units in the same period last year.
According to Nuvama, “Wagon production hampered by falling order book.”
The brokerage noted that the company’s existing wagon orders are expected to sustain production only until the third quarter of FY27.
Passenger coach business emerging as a bright spot
While the freight segment struggled, the passenger rail business delivered stronger performance.
As per Nuvama report, passenger segment revenue surged 96% year-on-year to nearly Rs 170 crore during the quarter.
Coach deliveries also increased sharply. Titagarh Rail Systems delivered 24 coaches during the March quarter compared to just six coaches in the corresponding period last year.
Nuvama report added, “On the positive side, execution/margins in the passenger coach segment ramped up.”
The brokerage believes this segment could play a larger role in supporting future revenue growth as metro and passenger rail projects move into execution phases.
Order book continues to provide visibility
Titagarh Rail Systems continues to have a sizeable order pipeline.
The company ended FY26 with an order book of approximately Rs 14,200 crore, translating into a book-to-bill ratio of around 4.5 times.
The brokerage report added, “Order book remained healthy at approx. Rs 14,200 crore (book-to-bill of 4.5x).”
A significant portion of these orders is linked to passenger rail projects, while the remaining orders are spread across freight wagons, shipbuilding and defence-related businesses.
Vande Bharat and metro projects could become key triggers
Nuvama highlighted multiple projects that could support execution growth over the next few years.
According to management commentary cited in the report, production of Vande Bharat trains has already commenced. The company expects to deliver the prototype during FY27.
The brokerage also noted that work on metro rail projects in Gujarat and Bengaluru is progressing steadily.
According to the report, “The company has also commenced production of Vande Bharat (VB) trains and expects to deliver the prototype by Q3FY27/Q4FY27E.”
In addition, deliveries for Mumbai Metro coaches are expected to begin during FY27, while Pune Metro orders are also likely to contribute.
What investors need to watch
Although Nuvama reduced its FY27 and FY28 earnings estimates by 14% and 3%, respectively, it continues to believe the company’s long-term opportunity remains intact.
According to the brokerage report, “The timing/quantum of likely wagon tender from Indian Railways would be a significant trigger for the stock.”
Disclaimer: Investment views, ratings, and price targets mentioned in this report are those of the domestic brokerage Nuvama Institutional Equities and do not reflect the official stance or endorsement of this publication. Readers are reminded that equity investments are subject to market risks, and market-linked analysis or target prices should not be construed as investment advice or a solicitation to buy. Please consult a SEBI-registered investment advisor or qualified financial consultant before making any personal investment decisions. This disclaimer has been generated using AI to support user well-being and responsible content consumption.