Exclusive: IRCTC, BEML, IRCON; Will Railway Stocks Dream Run Continue In 2024?

For railway stocks, the year 2023 was of remarkable growth and a strong outlook ahead. Railway stocks have witnessed a stellar bull run so far owing to key factors like investment programs during fiscal years 2024-31, developments in the G20 Summit, and improvement in businesses. Also, budget allocation is highest in this sector for FY24, production of Vande Bharat trains, and measures for revamping and enhancement of railway coaches and services. Following these developments, the majority of railway stocks have given triple-digit returns in 2023.

The major boost for railway stocks in 2023 has to be the all-time high budget allocation.

The ministry had allocated a whopping Rs 2.40 lakh crore as Gross Budget Support (GBS) for Capital Expenditure during 2023-24, of which, Rs 1.85 lakh crore is under capital, Rs 45,000 crore under Railway Safety Fund and Rs 10,000 crore as a contribution towards Rashtriya Rail Sanraksha Kosh.

As per the latest update, Minister of Railways, Communications and Electronic & Information Technology, Ashwini Vaishnaw in a written reply to Lok Sabha on December 15th said that "Replacement of railway assets viz. railway track, bridges, locomotives, wagons & signalling equipment is a continuous process, which is taken up on age-cum-condition basis under coral life provisions. Regular inspection of railway assets is carried out to ensure their fitness for service. Obsolete railway assets are condemned and replaced with new technology on age-cum-condition basis."

Stocks like IRCTC, RVNL, Titagarh Wagon, Texmaco Rail, IRFC, K&R Rail Engineering, BEML, Container Corp, and IRCON among others have seen double-to-triple digit upside in percentage terms in 2023. Some stocks like K&R have even given four-digit returns.

What to expect from railway stocks in 2024?

Manish Chowdhury, Head of Research, StoxBox said, "We expect railway stocks to continue their dream run in 2024 as well, aided by the government's increased capital outlay for railways."

He believes that multiple triggers are in place which provide revenue visibility for railway stocks including the revamping of major stations, introduction of newer trains such as Vande Bharat, focus on laying new railway tracks, work towards achieving 100% electrification and tenders for Train Collision Avoidance System to enhance safety.

According to the analyst, a long-term driver for railways stocks could be the recent announcement of the India-Middle East-Europe economic corridor which would open up opportunities for companies across the value chain of the railway sector.

With most of the railway stocks delivering stellar returns in 2023, the analyst said, "We advise investors to consider IRCTC, IRCON and BEML from a medium-to long-term perspective."

Here are the key details of these three stocks:

IRCTC:

On December 18th, on BSE, Indian Railways backed catering service provider, IRCTC shares ended at Rs 879.10 apiece, with an upside of at least 12.6% from its previous session's print of Rs 780.95 apiece. The stock's market cap is at Rs 70,328 crore. During the trading session of Monday, IRCTC shares zoomed by nearly Rs 108 or 13.82% to hit a new 52-week high of Rs 888.90 apiece.

YTD, the stock has gained by nearly 37% on BSE. The outlook for IRCTC looks promising.

The company is planning to proliferate in the areas of business beyond Railways. IRCTC has aggressive plans to further mark its signature in the catering business and customise it to the requirements of clients. It has already signed MoUs with various governments and autonomous bodies including defence establishments such as the Border Security Force, Indian Maritime University - Kolkata, Cotton University - Guwahati and so on while the company is in the active phase of commissioning 15 more catering units across the country shortly.

In the last 12 months, the company had paid dividends up to Rs 8 per share. Currently, its dividend yield is at 0.91%.

IRCON International:

IRCON's share price is currently near its 52-week high of Rs 179.90 apiece. On Monday, the stock ended at Rs 177.85 apiece, up by 3.5% with an m-cap of Rs 16,727.07 crore.

This railway stock is a multi-bagger in 2023. So far, the stock has zoomed by nearly 199% in the current year.

IRCON was set up to utilize the Indian Railway's experience in helping Developing Nations of the world to install or maintain their railways and also to execute railway projects for the private sector. The Company's specialization is in Railways, Railway Electrification, Signal and Telecommunication, construction of roads, highways, commercial, industrial and residential complexes, airport runways, airport constructions, leasing of locomotives, mass rapid transit systems etc.

BEML:

Unlike IRCTC and IRCON, BEML's share price ended lower by 0.63% to Rs 2,567.65 apiece on BSE. The company's market cap is at Rs 10,692.85 crore.

Year-to-date, BEML shares have gained by 68.75% on BSE. In a 5-year span, the stock is multi-bagger with an upside of a whopping 243.68%.

The company paid a total dividend of up to Rs 10 per share to its shareholders in the last 12 months. Currently, it has a dividend yield of 0.39%.

BEML operates in three verticals viz. Defence & Aerospace, Mining & Construction and Rail & Metro and has state-of-the-art manufacturing facilities located at Bangalore, Kolar Gold Fields (KGF), Mysore, Palakkad. BEML has a very strong R&D infrastructure. BEML also has a nationwide network of sales and services.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.