RVNL Share Price: Is the Stock Still Attractive After a 400% Rally?

Following a long winning streak, many investors and experts believed any further gains for Rail Vikas Nigam Limited (RVNL) would merely be incremental. With most order book developments already priced in, investors were not expecting any major changes until the Union Budget 2024. However, RVNL’s share price defied expectations, soaring by an impressive 46% over the past five days. This unexpected surge has left many wondering what’s next for this promising company. Let’s explore the reasons behind this surprising uptick.

Reasons for RVNL Share Price Rise

Government’s Ambitious Plans

The Indian Railways has announced a significant plan to manufacture 10,000 AC coaches over the next two years, aimed at improving facilities for common passengers. According to Northern Railway, the overall count of non-AC coaches will increase by 22% during this period. In the fiscal year 2024-25, production will include 2,605 general coaches, 1,470 non-AC sleeper coaches, 323 sitting-cum-luggage rake (SLR) coaches, 32 high-capacity parcel vans, and 55 pantry cars. These coaches are designed to enhance passenger comfort on Amrit Bharat trains.

For the fiscal year 2025-26, the plan includes 2,710 general coaches, 1,910 non-AC sleeper coaches, 514 SLR coaches, 200 high-capacity parcel vans, and 110 pantry cars. This initiative focuses on ensuring adequate and improved facilities for non-AC passengers and meeting seasonal demands.

RVNL stands to benefit significantly from this initiative, potentially increasing project opportunities. The expansion in railway manufacturing will likely boost RVNL’s revenue, as the company plays a crucial role in the infrastructure work involved.

New Memorandums of Understanding (MoUs)

On July 10, 2024, RVNL announced a new MoU with IMS Consultancy to provide technical and advisory services for various projects in Nepal. These projects span railways, MRTS, tunnels, roads, bridges, building works, airports, ports, irrigation, power transmission and distribution, and renewable energy sectors like solar, wind, and hydro power. This partnership opens up new project opportunities in Nepal for RVNL.

Additionally, on July 9, 2024, RVNL signed an MoU with TATWEER Middle East and Africa. This collaboration aims to leverage RVNL’s expertise in the railway sector to develop joint capabilities in the design and execution of rail-based works in the MENA region and European countries. It also covers smart city projects, digital transformation, and professional engineering services.

Moreover, RVNL recently signed an MoU with Delhi Metro Rail Corporation (DMRC) to participate in upcoming projects in India and abroad. This agreement involves projects related to metro, railways, high-speed rail, highways, mega bridges, tunnels, institutional buildings, workshops, depots, S&T works, and railway electrification.

These MoUs diversify RVNL’s project portfolio and enhance its technical capabilities, leading to increased revenue and profitability.

Multiple Order Wins

Alongside strategic MoUs, RVNL has secured multiple orders, showcasing its strong market position and capabilities. Here are some orders received in the last month:

1. Maharashtra Metro Rail Corporation

• Order Date: 09.07.2024

• Details: Construction of 6 elevated metro stations

• Order Value: Rs 1.9 billion

• Time Period: 30 months

2. SER HQ-ELECTRICAL/South Eastern Railway

• Order Date: 07.07.2024

• Details: 132 KV Traction Substation

• Order Value: Rs 2 billion

• Time Period: 18 months

3. Central Railway

• Order Date: 02.07.2024

• Details: OHE modification work in Wardha-Ballarshah Section

• Order Value: Rs 1.3 billion

• Time Period: 24 months

4. North Central Railway

• Order Date: 27.06.2024

• Details: EI based Automatic Signaling in Dhaulpur-Gwalior Section

• Order Value: Rs 0.7 billion

• Time Period: 455 days

5. Southern Railway

• Order Date: 26.06.2024

• Details: Automatic Signaling on Ernakulam JN - Vallattol Nagar Section

• Order Value: Rs 1.6 billion

• Time Period: 750 days

6. SER HQ-ELECTRICAL/South Eastern Railway

• Order Date: 26.06.2024

• Details: 132 KV Traction Substation

• Order Value: Rs 1.9 billion

• Time Period: 18 months

7. East Coast Railway

• Order Date: 14.06.2024

• Details: Automatic Block Signaling system

• Order Value: Rs 1.6 billion

• Time Period: 24 months

8. Central Railway

• Order Date: 10.06.2024

• Details: OHE modification work in Amla-Nagpur Section

• Order Value: Rs 1.4 billion

• Time Period: 24 months

9. Bangalore Metro Rail Corporation

• Order Date: 10.06.2024

• Details: Phase-2A & Phase 2B electrification

• Order Value: Rs 39.4 billion

• Time Period: 130 weeks

These orders underscore RVNL’s growing influence and success in securing significant projects, likely enhancing its financial performance and investor confidence.

Future Prospects

As part of its growth strategy, RVNL is expanding its reach into metro line development for major cities and suburban networks. Beyond geographical expansion, RVNL is also forming partnerships within the rolling stock manufacturing sector, solidifying its position in the rail ecosystem.

RVNL’s strong performance, coupled with government backing, positions it well to benefit from India’s massive investment in new trains and rail infrastructure. Its expertise in project management, financing, and construction makes it a natural choice for executing new lines, station redevelopment, and other crucial initiatives.

Moreover, with its recent recognition as a Navratna company, RVNL now has greater autonomy in project execution, capital expenditure, and international ventures. As the substantial order book translates into project execution, RVNL’s margins are expected to improve, further strengthening its position as a leader in Indian rail infrastructure development.

Recent Share Price Performance

In the past five days, RVNL share price has rallied more than 46%. So far in 2024, the stock is up 238.4%. Over the past six months, it has surged 212%, and in the last year, it has risen around 403.9%. The stock reached its 52-week high of Rs 620 on July 9, 2024, and a 52-week low of Rs 117 on July 13, 2023.

About Rail Vikas Nigam Limited (RVNL)

Rail Vikas Nigam Limited is an Indian public sector undertaking that operates as the construction arm of the Ministry of Railways, focusing on project implementation and transportation infrastructure development. Incorporated in 2003 to meet the country’s growing infrastructural requirements and expedite project implementation, RVNL is a category-I Miniratna public sector undertaking under the administrative control of the Indian Ministry of Railways.

In Conclusion, The recent surge in RVNL’s share price highlights the company’s potential and strong market position. With government support, strategic MoUs, multiple order wins, and significant future prospects, RVNL is well-positioned to continue its upward trajectory. Investors looking for opportunities in the infrastructure sector may find RVNL an attractive option given its robust performance and promising outlook.