On July 25, shares of RVNL dropped by about half a percent even though the company received a Letter of Acceptance (LoA) for a Rs 191.53 crore project from South Eastern Railway.
The project involves the design, supply, installation, testing, and commissioning of 132 KV traction substations and other posts on the Rajkhaswan-Nayagarh-Bolani section of the Chakradharpur division. This work will help meet the 3000MT loading target in the area.
Despite this new project, RVNL shares fell. The stock had been a high performer but experienced a significant drop after the Union Budget 2024. Investors were disappointed because the budget speech by Finance Minister Nirmala Sitharaman did not focus much on the railway sector, leading to declines in the stock prices of RVNL and other railway-related companies like Ircon International, IRFC, and RailTel.
Analysts from Elara Capital mentioned that although capital expenditure remained, the initial excitement in sectors like Aerospace & Defense, Railways, Infrastructure, and Shipbuilding is expected to shift towards actual execution.
In the previous session, RVNL stock ended slightly higher at Rs 592.50 on the National Stock Exchange (NSE). The stock has increased by over 220% this year and more than 357% in the past year due to improving company fundamentals.
RVNL’s profit after tax has grown from Rs 790 crore in FY19 to over Rs 1,640 crore in FY24, thanks to securing large infrastructure orders from the government. The company continues to attract infrastructure projects both in India and internationally.
RVNL has an order book of around Rs 65,000 crore and aims for an additional Rs 25,000 crore in new orders each year. Its consistent track record and strategic collaborations position it for future growth, according to analysts.
However, RVNL faces risks such as project delays, heavy reliance on government contracts, regulatory changes, economic slowdowns, funding issues, increased competition, and cost overruns, which could impact its profitability.
Bloomberg data shows that the stock has a ‘hold’ rating from three analysts, with no buy or sell recommendations.
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