Railway stocks experienced significant gains on Monday, with Jupiter Wagons shares soaring 10% to ₹304, Titagarh Rail Systems rising 9% to ₹828*, and Texmaco Rail & Engineering gaining over 6% to ₹115.1* following reports of a major procurement initiative. According to reports from Mint, Indian Railways is preparing to launch a mega ₹40,000-crore tender to procure 1 lakh freight wagons over the next four years. The proposed tender is expected to be slightly larger than the previous major wagon procurement exercise undertaken in 2022. As per Mint, the stocks continued to trade higher in the 5.5% to 8.4% range throughout the session.
As reported by Mint citing two sources, Indian Railways may procure around 35,000-40,000 wagons annually, with the first set of orders likely to be issued during the July to September quarter of the current financial year. The tender is expected to be issued in phases, with Indian Railways currently holding discussions with manufacturers to assess their production capabilities before floating the tender. The industry is completing orders under the previous Indian Railways wagon tender, with fresh orders providing longer visibility allowing the domestic wagon industry to function at capacity. In 2022, Indian Railways issued its first long-term wagon procurement tender for around 1 lakh wagons worth approximately ₹32,000 crore, with deliveries still ongoing for some wagons under this tender.
According to Mint reports, nearly one-third, or around 11,000 wagons, of the annual wagon procurement under the previous Railways tender was supplied by Kolkata-based Texmaco, which currently has the capacity to manufacture more than 15,000 wagons annually. The report indicates that the industry's completion of previous orders and fresh orders with longer visibility will allow the domestic wagon industry to function at capacity and maintain operations of their production lines.
Last month, Jefferies initiated coverage on Titagarh Rail Systems with a 'Buy' rating and a target price of ₹810, a level the stock has already crossed. On Titagarh Rail, Jefferies said the company is likely to emerge as a major beneficiary of the shift towards passenger and metro coach manufacturing, projecting a 35% revenue CAGR and 43% EPS CAGR over FY26-30. The brokerage noted that Titagarh's passenger rail systems order book stands at ₹108 billion, equivalent to 42 times FY5 passenger rail systems sales, with the share of passenger business revenue expected to rise from 7% in FY5 to 63% by FY8.
In contrast, Jefferies expects growth at Jupiter Wagons to moderate as the business remains heavily dependent on the lower-growth freight wagon segment. The brokerage estimates a 23% EPS CAGR for Jupiter Wagons over FY26-30, significantly lower than Titagarh's projected 43%, with wagons expected to continue contributing more than 60% of overall sales even by FY8. Jefferies assigned an 'Underperform' rating and a ₹200 target price for Jupiter Wagons, stating that with valuations at 40x FY7E PE, similar to Titagarh, it finds Jupiter too expensive for the growth differential.
