Multibagger Stock: Texmaco Rail & Engineering Falls 6% on Profit Booking – Is This a Buying Opportunity?

Texmaco Rail & Engineering’s share price has surged by over 260%, giving investors significant gains. Recently, Nuvama Institutional Equities, a domestic brokerage, started covering Texmaco with a target price of ₹331 and a “buy” rating. The brokerage highlighted that Texmaco Rail is experiencing a remarkable recovery after some tough years. This is supported by rising railway capital expenditures, strong wagon orders (which have increased by about 75% over FY23–24 compared to FY14–22), and a net cash balance sheet (more cash than debt).

Current Stock Movement

On Tuesday, Texmaco Rail & Engineering’s share price dropped nearly 6%, trading at ₹271.35 per share on the BSE. The stock opened at ₹288.10, reached an intraday low of ₹269.20, and an intraday high of ₹291.10.

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Analysts’ View

Rajesh Bhosale, an Equity Technical and Derivative Analyst at Angel One, said, “After the recent strong performance, prices are seeing some profit booking and are down more than 4% due to overbought conditions of RSI. While profit booking may continue, this could be a buying opportunity. The next support is at 250 with 300 as resistance.”

Potential Growth Factors

Nuvama noted several factors that could boost Texmaco’s stock:

1. Improvement in operating margins and working capital (currently ongoing but will take time).
2. Possible demerger of the rail EPC business, leaving Texmaco with a capital-light business in wagons, OHE, and components.
3. Expansion of the component business.

These factors are expected to play out over the coming years, significantly increasing the company’s earnings. However, the main concern is a potential slowdown in the growth of railroad capital expenditures and freight.

Investment Rationale

The brokerage sees Texmaco Rail & Engineering as a seasoned player in the rail industry with a variety of opportunities. It is considered a leading producer of rolling stock for railroads with a history of strong performance. The varied presence reduces the wagon segment’s inherent risk of cyclicality. Additionally, there are major plans to increase production capacity for wagons, steel foundries, and components to seize new opportunities both in India and abroad.

Company Background

Texmaco was founded in 1939 as a manufacturer of textile machines. Over time, it expanded into other engineering fields. Today, Texmaco has a wide range of business lines, including steel castings, hydro-mechanical equipment, bridges, wagon manufacturing, components and assemblies, and structural equipment. The company has built a strong infrastructure base across 155 acres, with five production plants in the Kolkata suburbs of Agarpara, Belgharia, Sodepur, and Panihati.