Texmaco’s stock price soars 300% in one year. Will the momentum continue?

Texmaco : The Indian railway industry has always been known to remain strong and overcome challenges. This reputation has proven to be true in recent years, with many rail companies showing steady growth driven by strong order volumes and steady profits.

One of the biggest reasons why the railway industry is achieving consistent results is the support from the Indian government. Government supports the industry in a variety of ways, including funding important projects, selecting companies for contracts and launching new rail development projects. This support is a key element in keeping the rail sector stable and thriving.

One company that has shown a great growth trajectory is Texmaco Rail and Engineering Ltd. The company’s stock returned an impressive 300% in just one year. As of the third quarter of FY24, the company’s orders stood at Rs 8,517 crore. With this, we will take a closer look at the company’s business, segments, financial position over the years, and future prospects. Will we have the same growth trajectory in the future?

Texmaco Railway and Engineering Company

business overview

Texmaco Rail & Engineering Ltd. is a prominent manufacturing enterprise specializing in the production of railway vehicles including coaches, coaches, EMUs, loco shells and components, hydraulic machinery equipment, steel castings, railway EPCs, bridges, freight cars and other vehicles. other steel structures.

Texmaco has emerged as a leading and reliable freight vehicle manufacturer with a business history of over 80 years. The company’s diverse product portfolio is the result of strategic and technological cooperation with renowned multinational partners from Japan, the United States, the United Kingdom, Germany, Australia, Austria and the Netherlands.

TEXMACO has been a trusted freight vehicle manufacturer for 80 years, serving key industries such as cement, steel, defence, fertilizer, petroleum, alumina, thermal power projects and chemical plants. The company is the only company exporting railway castings from India. They export to niche countries such as America, Australia, Eurasia, etc. Exports increased significantly to Rs 140 crores in FY23 compared to Rs 95 crores in FY22. Now let’s look at the company’s departments and revenue distribution.

truck

Texmaco Rail & Engineering Ltd. manufactures freight cars for various types of trains. They help the Indian Railways by building strong and reliable freight cars that can transport goods across the country. They also design specialized cars for specific needs, such as transporting different types of goods or serving unique purposes.

Texmaco is known for building freight cars using a variety of materials such as mild steel, stainless steel and composites, demonstrating its willingness to try new and innovative things in the rail industry. Texmaco has established itself as a leading and reliable freight vehicle manufacturer and contributes approximately 45% of the company’s revenue.

railway infrastructure

In its Railway Infrastructure and Other divisions, Texmaco focuses on contributing to the development and modernization of railway infrastructure. This includes projects related to railway electrification, track laying and other important components that improve the efficiency and safety of the railway network.

steel foundry

Steel Foundry of Texmaco Rail & Engineering Ltd. is a prominent company in India. It is the largest internationally recognized foundry in Korea. Not only is it the largest manufacturer of castings used in Indian Railways, it is also the largest exporter of these railway castings from India.

Foundries don’t just manufacture in India. They make important parts of trucks such as bogies and castings and these parts are exported to various countries. It’s not just about trains. The foundry also makes products for the defense, marine and mining industries. And if that isn’t impressive enough, it also plays a key role in creating the intersections and turnout needed for high-speed rail. In short, this foundry is a big deal not only in India but also around the world.

Component Systems and Solutions

Texmaco Rail & Engineering Ltd.’s Component Systems & Solutions division is your global partner for precision component and systems sourcing. They provide precisely crafted pieces and solutions. This distinction isn’t just about making things. We help our global partners by supplying parts such as train bogies, passenger rail vehicles, and subway rail components.

Texmaco doesn’t just work with local companies. We also have partnerships with large international companies. In addition, they are busy making interior parts for passenger trains to make people’s travel more comfortable. Simply put, Texmaco is a globally popular team that provides well-made components and solutions to keep trains and subway systems running smoothly.

Source: Investor Presentation

Key business developments

Robust order book structure

Texmaco Rail & Engineering Ltd. has a strong order book worth approximately INR 8,517 crores, demonstrating its diversified capabilities. A major part of this is rolling stock, like trains, worth a whopping INR 5,400 crores.

Other important departments also contribute including Kalindee Division with INR 1,000 crores, Bright Power Division with INR 550 crores, Hydromechanical Bridges with INR 100 crores and Steel Foundry with INR 500 crores.

Global presence and export success

Texmaco is doing well internationally, selling a lot of its foundry products, especially in the United States. Demand for Texmaco products is also growing in African countries, and there is also interest in Europe, mainly due to supply chain issues in Ukraine. Texmaco watches these markets closely and has a dedicated export team.

Strategic Initiatives and Financial Outlook

Texmaco has received approval to raise funds with INR 500 crores and there are several good reasons for this. Some of it goes towards day-to-day expenses (working capital), some towards rail projects (rail EPC), some towards high-cost loan repayments and some towards critical expenditures (capital expenditure). These funds will help Texmaco manage its money wisely.

Record Orders and Collaborations

Texmaco recently received its largest ever order from Indian Railways for over 20,000 freight cars and is working hard to fulfill this. They have also expanded their product range by collaborating with Hindalco to create aluminum lorries. In Europe, another collaboration took place with M/s. NYMWAG CS, a large wagon manufacturer that creates more wagons and parts together.

Steel foundry operation performance

Texmaco’s steel casting division produces many steel castings and is performing well. They produce 3,000 metric tons of castings per month using both their facilities in Belgharia and Urla. They have received bulk orders from Indian Railways and even Australia’s BRADKEN, showing that there is a demand for their products.

Strategic Focus on Rail Infrastructure

To simplify operations, Texmaco decided to separate the Construction and Projects department into a new part of the company. This new segment will focus solely on building rail projects, making Texmaco more efficient at doing what it does best: making rail better.

What does the future hold for the company?

Texmaco Rail & Engineering Ltd.’s future prospects are marked by strategic plans to solidify its position in the railway industry and expand its global footprint. The strategic partnership with Hindalco for aluminum vans will make Texmaco a qualified supplier in Europe. The move is consistent with the growing emphasis on lightweight, fuel-efficient freight vehicles, enabling Texmaco to meet evolving market demands.

Additionally, the joint venture between WABTEC and Texmaco focuses on manufacturing world-class brake systems and components for the domestic and US markets. By redesigning existing product lines and adopting a market-driven approach, Texmaco aims to create centers of excellence and achieve cost savings.

As for future goals, Texmaco aims to increase the share of exports and sales to private players in all sectors. We plan to expand production capacity by producing 1,000 trucks per month. Texmaco plans to become debt-free within three years, ensuring financial health and stability. The strategic decision to spin off non-core businesses reflects Texmaco’s focus on optimizing its operating structure.

As Indian Railways plans to procure 1,50,000 freight coaches by 2025, the company is expecting significant opportunities in the railway sector. Texmaco is well-positioned to benefit from strong government infrastructure spending, particularly in the area of ​​railcars, where wagon manufacturers have received orders exceeding annual orders. Total for the past 10 years.

Globally, Texmaco is targeting a three- to five-fold growth in exports of components and railway castings. Becoming a qualified supplier to foreign companies and leveraging geopolitical changes in the supply chain are key elements of Texmaco’s strategy for expanding its global presence.

Finishing

In summary, Texmaco Rail & Engineering Ltd. is strategically positioned for future growth through technological advancements, global expansion and a focus on operational efficiency. The company’s vision includes becoming a major player in both domestic and international markets, capitalizing on industry trends and contributing to the evolving rail sector environment.

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Written by Akshita Malu

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