Top Railway Stocks to Consider with Potential Upside of Up to 30%

Railway sector investments are gaining momentum, offering various opportunities in areas like rolling stock, rail construction, exports, and railway station development. Analysts note that several railway stocks are trading at reasonable valuations, making them attractive investment options.

Antique Stock Broking predicts a 15% compound annual growth rate (CAGR) in railway sector revenue over the period from FY23 to FY26. With a growing order book, a strong government focus on railway infrastructure, and a healthy order pipeline, there is potential for upside in revenue growth. Railway equipment and EPC (Engineering, Procurement, and Construction) companies are expected to see revenue and earnings grow at 15% and 19% over the same period, respectively.

Here are some top railway stocks to consider:

1. IRCON International: The company primarily engages in railway EPC works, with railways making up around 73% of its order book. IRCON aims to expand into high-speed rail, semi-high-speed rail, solar, and road projects. Antique Stock Broking has a ‘Buy’ rating on the stock with a target price of ₹176 per share, representing a potential upside of over 23%.
2. RITES: RITES is expected to benefit from adding ₹8.5 billion from Zimbabwe and ₹5 billion from Mozambique to its export backlog. Consultancy services contribute significantly to its backlog, providing steady growth. The brokerage maintains a ‘Buy’ rating on the stock with a target price of ₹621 per share, indicating a potential upside of nearly 30%.
3. Titagarh Rail Systems: Titagarh Rail Systems has diversified into the passenger transport sector and has the potential to significantly increase its turnover in the coming years. Antique Stock Broking predicts an earnings CAGR of 57% from FY23 to FY26 and an average RoE of over 25%. The firm has a ‘Buy’ rating on the stock with a target price of ₹1,013 per share, suggesting a potential upside of more than 30%.

Investors should be mindful of competitive pressures and infrastructure delays in the linear infrastructure sector when considering these stocks. However, the overall outlook for these railway companies remains positive, driven by infrastructure development and growth opportunities in the sector.