Fundamental Analysis of RVNL: Growth in RVNL Share Price

Rail Vikas Nigam Limited (RVNL) was introduced in 2003 to bridge the infrastructure gap in Indian Railways by fast-track execution of Railway projects. After a time, RVNL migrated from its original mandate of ‘rail infra’ projects to the ever-expanding opportunities of All Infra i.e. from #Local RailInfra to #GlobalAllInfra after successfully achieving its previous objective by completing more than 150 Railway projects. RVNL commenced its operations in 2005 and is engaged in the business of implementing various types of Rail infrastructure projects assigned by the Ministry of Railways (MoR) including doubling (including 3rd/4th lines), gauge conversion, new lines, railway electrification, major bridges, workshops and production units.

RVNL’s Operational Performance

• Doubling / New Line / Gauge Conversion: In FY24, 666.06 km of railway sections were commissioned, comprising 70.19 km of new lines, 24.53 km of gauge conversion, 560.01 km of doubling, and 11.3 km of Kolkata Metro, which was handed over to Zonal Railways for operations.
• Railway Electrification: The company commissioned 239.38 route km (309.70 track km) of exclusive railway electrification works on key routes
• Signalling & Telecom: The Signalling & Telecommunication (S&T) domain is a core area of expertise, providing signalling solutions for efficient and safe train operations on Indian Railways. Recent years have seen significant advancements, including the induction of Electronic Interlocking (EI), Digital Axle Counters, and a Fibre Optic Cable Network, enhancing capacity building.
• Hill Railway Projects: Notable progress was achieved on three hill rail projects assigned to RVNL by Indian Railways: the Rishikesh-Karnaprayag section in Uttarakhand, the Bhanupali-Bilaspur-Beri section in Himachal Pradesh, and the Budni-Barkhera 3rd line project in Madhya Pradesh. In 2023-24, RVNL completed 67.33 km of tunneling.
• Pamban – Vertical Lifting Bridge: Work on India’s only movable rail bridge in Rameshwaram is advancing well, utilizing state-of-the-art technology. Completion is anticipated in 2024-25.

RVNL SWOT Analysis

Strengths

• RVNL has developed expertise in all stages of project development, from concept to commissioning.
• The organization has refined its tendering processes and introduced innovative concepts like multi-package tenders, leading to faster decision-making and cost savings.

Weaknesses

• RVNL relies heavily on the Ministry of Railways (MoR) for the sanction of revised estimates.
• Project execution is dependent on rail traffic blocks, which can cause delays.

Opportunities

• RVNL is actively implementing the Rishikesh-Karnaprayag project in the Himalayan region and has the potential to undertake more projects in hilly terrains and strategically located areas.
• As RVNL grows as a key provider of rail infrastructure, there are opportunities to secure projects internationally.

Threats

• A shortage of experienced technical manpower in the rail sector poses a significant challenge to project delivery.
• Land acquisition issues need to be resolved promptly to avoid hindering project progress.

RVNL Share Price Growth

The  RVNL share price has experienced a remarkable surge over the past year, climbing approximately 236% from its 52-week low of ₹152.45 on October 26, 2023. This significant growth has positioned RVNL as one of India’s top-performing railway stocks, with a year-to-date increase of 162%. As of October 30,  2024, RVNL shares opened at ₹440.00 and touched the day high of ₹479.15 at 2:00 PM, reflecting a gain of 8.86% from the previous close. RVNL shares were trading at a Price-to-Earnings (PE) ratio of 67.92 against the industry P/E of 11.92.

RVNL Financial Performance

In FY24, RVNL increased its project execution expenditure from ₹20,281.57 crore to ₹21,732.58 crore, excluding ₹3,911.93 crore related to GST. Profit Before Tax rose from ₹1,644.38 crore in 2022-23 to ₹1,939.40 crore in 2023-24. Additionally, Profit After Tax (PAT) reached ₹1,462.95 crore, reflecting a 15.38% increase over the previous year.

In Q1 FY25, RVNL’s net profit fell by 34.7% to ₹223.92 crore, down from ₹343 crore in the same quarter last year. Revenue from operations decreased by 26% to ₹4,073 crore, compared to ₹5,571 crore in the previous year’s quarter. The EBITDA for the quarter was ₹182 crore, resulting in an EBITDA margin of 4.5%.

Railway Industry Overview

The Indian railway system is widely recognised as a cornerstone of the nation’s economy. In FY24, Indian Railways generated a total revenue of ₹2.56 lakh crore (US$ 30.76 billion) and laid 5,100 kilometers of new track. Over the next 5 years, India’s railway market is projected to become the world’s 3rd -largest, capturing 10% of the global market share. To accommodate the growing population and travel demand, Indian Railways plans to introduce 3,000 new trains in the next 4 to 5 years. This expansion aims to increase passenger capacity from 800 crore to 1,000 crore.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.