Basic Analysis of Titagarh Railway System

Basic Analysis of Titagarh Railway System: The Indian railway system has a long and interesting history and has been a reliable means of transportation for both people and goods throughout India. Despite its long history, the sector continues to grow and develop, providing significant investment opportunities. One of the companies contributing to this sector is Titagarh Rail Systems Ltd. In this article, we will attempt to perform a fundamental analysis of Titagarh Rail Systems and analyze the company’s potential prospects.

Basic Analysis of Titagarh Railway System

We will begin our fundamental analysis of Titagarh Rail Systems Ltd by getting to know the company’s operations and products. Next, let’s look at equity finances. The article concludes with the main plan and summary.

Industry Overview

The government has allocated Rs. 2.40 Lakh Cr for Railways-Capex is the highest ever allocation, up 51% year-on-year. The allocation for rolling stock was Rs. 3,758.1 billion won, double the amount compared to the same period last year.

Indian Railways recorded its best-ever performance by achieving first freight loading of 1512 MT in FY23 compared to 1418 MT achieved in FY22. Coal supply to power plants has increased, with 569 MT of coal moved compared to 485 MT in FY22.

Indian Railways placed its largest-ever order of about 72,000 wagons last year. Reports hint that an additional 40,000 wagons will be ordered. It is poised to increase rail’s share of freight transport from around 27% – 45% by 2030.

The commissioning of the New Dadri-New Rewari section will ensure smooth movement of cargo from interior Uttar Pradesh to ports in western India.

DFC is an important initiative under the National Logistics Policy, which aims to reduce logistics costs from approximately 15% of the country’s GDP to 8% by 2030.

Increasing the capacity of DFC’s freight infrastructure is critical to achieve the Indian Railways’ target of 3000 MT freight load by 2027. This will definitely lead to increased traffic and thus demand for wagons.

Company Overview

Titagarh Railsystems Ltd, formerly known as Titagarh Wagons Limited, was established in 1980 as a railway vehicle foundry unit.

The company started out manufacturing railway castings for the Indian Railways and later shifted to producing freight wagons. Today, it is a leading mobility provider with a strong presence in India and Italy.

The company’s customers include Indian Railways, metropolitan authorities, private sector customers and the Ministry of Defense.

Currently, the company’s business is divided into two segments:

One. Freight rail system: In this segment, the company designs and manufactures wagons, bogies, loco shells, couplers, components, warships, passenger ships, tugboats and special equipment for defense, bridge girders, etc.

2. Passenger rail systems: In this segment, the company designs and manufactures subways, passenger cars, EMUs, train sets, monorails, propulsion equipment, traction motors and their components.

Revenue contribution and order book

As of FY23, freight rail systems contributed 76.47% and passenger rail systems contributed 23.53% of the company’s revenue. At the end of FY23, the company received orders worth Rs.14,830 Crores from Freight Rolling Stocks and received Rs. 12,716 Crores in passenger rail stocks.

Titagarh Railway System – Finance

Let us now do a fundamental analysis of Titagarh Railsystems Ltd. using the annual reports declared by the company.

Increased sales and net profit

You can see from the profit and loss account that the company’s revenue has been impacted by COVID-19, which can be seen in its FY21 and FY22 results.

During FY23, revenue increased significantly and was reported at ₹2822.17 crores. The increase in revenue was due to the largest order the company received in the freight rail systems segment.

The order was for manufacturing and supply of 24,177 wagons worth over Rs. 7,800 Crore as of May 2022. This must be implemented over 39 months.

The company’s profits follow a similar trend. From FY19 to FY22, the company reported a net loss. During FY23, the company reported a net profit of ₹176 crores.

memo: The net results for FY22 and FY23 take into account losses of ₹78.48 crores and ₹8.9 crores respectively due to discontinued operations.

The table below shows the total revenue and net profit of Titagarh Railsystems Ltd for five financial years.

Margin analysis

If we look at the company’s margins, we can see that the company’s operating profit is low due to high raw material costs. This mainly led to the company’s low net profit margin.

The table below shows the operating profit margin and net profit margin of Titagarh Railsystems Ltd for five financial years.

Rate of Return: RoCE and RoE

The company’s poor performance from FY19 to FY22 can be reflected in the company’s very low returns.

The positive thing is that these ratios improved significantly in FY23, with ROE reported at 13.51% and ROCE at 18.58%.

This indicates an improved return on capital invested by shareholders and improved efficiency in utilizing the company’s resources.

The table below shows Titagarh Railsystems Ltd’s ROE and RoCE for five financial years.

Debt and interest coverage ratio

If we look at the company’s leverage situation, we can see that the company’s debt-to-equity ratio has decreased significantly in FY23. This indicates that the company uses funds for its operations.

During FY23, the company reported an interest coverage ratio of 3.35. This means that the company has earned enough profits to cover one additional interest payment.

The table below shows the leverage ratio of Titagarh Railsystems Ltd for five financial years.

Titagarh Railway System – Future Plans

So far, we have looked at Titagarh Railsystems Ltd’s previous accounting data for fundamental analysis. In this section, we will try to understand what the future holds for the company and its investors.

1. The company has strengthened its Titagarh and Bharatpur facilities with 1000 wagons. This is aimed at achieving supply chain improvements and increased productivity.
2. Over the next two years, the company plans to invest around Rs 650 million to improve capacity and infrastructure.
3. The company has partnered with international players to secure technical support for the new age wagons and a significant portion of the new tender planned by the Indian Railways.
4. The company plans to increase its share of exports of trucks, castings and other components. In addition, we are exploring the possibility of exporting passenger trains and subways.
5. The company is working to localize production of its entire propulsion system by FY 2025.

key indicators

Our fundamental analysis of Titagarh Railsystems Ltd is almost complete. Let’s take a quick look at some important stock indicators.

conclusion

Concluding our fundamental analysis of Titagarh Railway System, we can conclude that although the company has suffered losses previously, it has good potential for growth in the future.

This is due to the company’s strong order volume, loss-making operations, and future plans.

What do you think about the future of Titagarh railway system? Please share in the comments section.

Written by Aaron Barth

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