Indian Railway Finance Corp (IRFC): Top Railway Stock Corrects By 27% From 1-Yr Highs; Is It Undervalued, BUY?

Indian Railway Finance Corporation Ltd's (IRFC) share price has continued to trade volatile for the past weeks. Although, on Thursday, the stock witnessed gaining momentum, its weekly and monthly performance is on a bearish note. The stock has given zero returns in a month. Also, the stock price is down by 27% from its 52-week high of Rs 229.05 apiece.

The IRFC share price is currently at Rs 167 apiece, after market hours of September 12, up by 0.7% on BSE with a market cap of Rs 2,18,244.05 crore. The stock's 52-week high and low are at Rs 229.05 and Rs 65.75 apiece respectively.

However, IRFC's shares have still dipped by 2.8% on a weekly basis, and are down further down by 7.9% on a monthly basis. Nonetheless, IRFC stock has continued to be a gainer YTD with an upside of 66.38%.

In the long-term, IRFC shares are up by 572.03% in 5 years.

Is IRFC Stock Overvalued Or Undervalued?

As per Alpha Spread data, the estimated DCF Value of one IRFC stock is 53.47 INR. Compared to the current market price of 169.85 INR, the stock is Overvalued by 69%.

Data from BSE showed that IRFC's price-to-equity ratio is at 33.85x, while the price-to-book ratio is at 4.44x. Further, the return on equity is healthy at 13.11%.

BUY/SELL IRFC Stock?

Technical analyst Prakash Gaba told CNBC-TV18 that IRFC shares are currently undergoing some correction but are expected to move up again. Hence, he has recommended investors hold the stock on a long-term basis. He added, that in the short term, the support would be around Rs 150-160 for the stock, and a slight dip could give a good opportunity to add more positioning in the stock.

The long-term target in IRFC could be between Rs 230-250 levels. Earlier, Prabhudas Lilladher in its note said, "With the RSI cooling off from the overbought zone has arrived at an attractive zone with a positive trend reversal indicated to signal a buy and has much upside potential from the current zone. With the chart looking good, we suggest buying the stock for an upside target of 230-250 keeping the stop loss of 164." The target is yet maintained.

Technical Analysis On IRFC Share Price:

As per Trendlyne data, the moving averages of IRFC namely RSI and MFI indicators are stable at 32.3 and 18.5. Because, RSI below 30 indicates that the stock is oversold, while above 70 it hints that the stock is overbought. While MFI below 20 is considered strongly oversold, and this signals a rebound in the stock ahead.

Further, data revealed that IRFC has 3 bullish and no bearish candles active. The stock is trading below 6 out of 8 SMAs, while trading below 6 out of 9 Oscillators in bearish zone. Also, the stock's weekly average delivery volume is 36.64%.

Indian Railway Finance Corporation (IRFC) was set up on 12th December, 1986 as the dedicated financing arm of the Indian Railways for mobilizing funds from domestic as well as overseas Capital Markets. IRFC is a Schedule 'A' Public Sector Enterprise under the administrative control of the Ministry of Railways, Govt.

The primary objective of IRFC is to meet the predominant portion of 'Extra Budgetary Resources' (EBR) requirement of the Indian Railways through market borrowings at the most competitive rates and terms. The Company's principal business therefore is to borrow funds from the financial markets to finance the acquisition / creation of assets which are then leased out to the Indian Railways.