Midcap indices have broadly corrected since past few months, and the start of March 2025 was no different. On Monday alone, Nifty Midcap 100 index plunged nearly 2% before correcting. While in a month, the index is down by 11%. All midcap stocks month-on-month performance is in deep red, however, there is one railway stock that has seen a significant drop. Over 30-days, this railway PSU stock has nosedived by more than 30%. It is none other than Rail Vikas Nigam Limited (RVNL).
Should You BUY RVNL?
As per Antique Stock Broking, Rail Vikas Nigam (RVNL) reported weak 3QFY25 with PAT down 13% YoY. PAT decline was led by weak revenue at -3% YoY, margin was similar to the base quarter coming in at 5.2% vs. 5.3% YoY with lower other income and a higher tax rate. RVNL's YTDFY25 order inflow (LOA + L1) was healthy at INR 250 bn and has an order book of INR 970 bn (4.8x TTM revenue). It comprises mainly of nomination orders (49%) and the remaining 51% work has been secured from bidding. Competitive orders are from the railways, irrigation, power, metro, etc. Currently ~INR 45 bn worth of orders are from the international market.
Despite a good order book, Antique's note said, execution is expected to stay muted as projects are still in initial phase of construction (seeking approvals). RVNL has guided for flattish revenue on YoY basis in FY25E and FY26E. Post the result, the brokerage has cut its EPS estimates by 3%-7% over FY25-27E.
On the valuation, Antique's note said, "We admit RVNL had an exceptionally strong execution (revenue) until FY22. But annual execution (revenue) over FY23-25E is largely muted. Order win and change of scope in existing order book has been there and order book too is largely the same in the last two years. Over FY25-27E, we have modelled order wins to match execution and this implies a stagnant order book. RVNL has signed MoUs but the actual outcome in terms of opportunity size is still unknown. Stock valuation (EPC business) at 47x FY27E EPS is pricing in an upside to CMP. Retain SELL rating.
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