IRFC: This Railway Stock's Engines Turbocharged From Rs 32 To Over Rs 100 In 2023! Where Its Headed Next?

Railway stocks have been star performers in 2023, with the majority of them giving triple-digit returns in the year. But there is one stock, that journeyed from being a penny stock to a large-cap in the current year. Furthermore, this stock has not just given triple-digit returns but also rose to a triple-digit price level. From paying hefty dividends to registering healthy growth in quarterly earnings, this stock is Indian Railway Finance Corporation (IRFC).

On December 20th, the stock had touched a new 52-week high of Rs 104.14 on BSE with the market cap crossing over Rs 1.20 lakh crore.

From its 52-week high levels, the stock has gained by a whopping 216.53% in 2023. Because, at the start of 2023, the stock was trading merely at Rs 32.90 apiece.

IRFC along with other railway stocks shot up sharply due to a host of factors such as 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.

Of all the reasons, 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.

IRFC also paid huge dividends in 2023. At the latest, this Railway stock turned ex-dividend on November 10th for an interim dividend of Rs 0.80 per share having a face value of Rs 10 each for FY24. In FY23, the company paid 15% dividends aggregating to Rs 1.5 per share. The stock's dividend yield is at 1.96%.

During Q2FY24, the company posted a net profit of Rs 1,549.87 crore as against Rs 1,714.28 crore in Q2FY23 and Rs 1,556.57 crore in Q1FY24. Total revenue from operations stood at Rs 6,766.32 crore compared to Rs 5,809.80 crore in Q2FY23 and Rs 6,679.17 crore in Q1FY24.

As per Trendlyne data, key verticals for IRFC share price are:

- Stock outperformed its sector by 126.01% in the past year.

- Promoter Pledges are zero.

- Price to Earning Ratio is 19.58, lower than its sector PE ratio of 24.

While the stock's Return on Equity(ROE) for the last financial year was 13.93%, Promoter Share Holding stayed the same in the most recent quarter at 86.36% -- which is neutral for the stock. Notably, ROE is still in the normal range of 10% to 20%. Apart from this, the Interest Coverage Ratio is 1.36, in the normal range of 1 to 1.5, which is also neutral for the stock.

However, among the negatives are -- Debt to Equity Ratio of 9.21 is higher than 1, implying that company assets are financed through debt; and Mutual Fund Holding decreased by 0.27% in the last quarter to 0.

Earlier this month, CA Vivek Khatri, SEBI Registered Research Analyst, through his X handler said that "125 is the objective" for IRFC shares.

Also, Trendlyne's consensus recommendation from 2 analysts for Indian Railway Finance Corporation is BUY.

Last month, brokerage Progressive Shares in its research report said, "IRFC Ltd has given a breakout from a continuation pattern known as Bullish Pennant and Pole Formation (Weekly Chart) as well as Symmetrical Triangle Formation (Daily Chart)." It added that Post the breakout, RSI has completed its pullback move as well, while irs reading of 50 in ADX indicates the presence of a strong uptrend and MACD MACD has given a positive crossover in the Daily frame. Lastly, the stock is quoting well above all the leading Moving Averages.

Hence, the brokerage recommended buying on IRFC for a target of Rs101-Rs126 with a horizon of 6-9 months.

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.