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IDBI Capital
Rail Vikas Nigam (Buy)
Target: ₹28
CMP: ₹20.65
Rail Vikas Nigam Ltd (RVNL), a Rail EPC company’s has received new orders of ₹6,100 crore in H1-FY21 and order book is healthy at ₹82,200 crore (6x TTM revenue).
We expect execution (revenue) to improve in H2-FY21 (H1-FY21 is negative 8 per cent y-o-y), as order book in execution stage has increased to ₹46,200 crore (Q2-FY21) vs. ₹35,800 crore q-o-q i.e. order book in execution stage is now at 56 per cent vs 44 per cent q-o-q.
The company has made a capital infusion of ₹63 crore in Angul Sukinda Railway Ltd and total investments in JV / Subsidiary stand at ₹1,650 crore (30 per cent of net worth).
We like RVNL for its order book visibility, fixed cost business model and experienced management.
We have introduced FY23 financials and roll forward TP. Revised TP is ₹28 (earlier TP ₹24), valued on an unchanged PER multiple of 6x (stock has traded at an average PER of 5.5x since its IPO).
It offers a dividend yield of 5 per cent/6 per cent (FY21 / 22).
Near term overhang on stock performance could be stake sale by Government of India.
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