RVNL Share Price Falls Despite ₹191 Crore Project LoA from South Eastern Railway

On July 25, RVNL shares dipped by approximately half a percent, even though the company received a Letter of Acceptance (LoA) for a ₹191.53 crore project from South Eastern Railway.

Despite this, RVNL share price rose by 0.46% on the BSE on Wednesday. The trading volume reached 20.70 lakh shares, resulting in a turnover of ₹123.21 crore. RVNL's market capitalization on the BSE increased to ₹1.23 lakh crore.

The LoA pertains to the “Design, Supply, Erection, Testing & Commissioning of a 132 KV Traction Substation, Sectioning posts (SPs), and Sub sectioning posts (SSPs) in a 2x25KV System on the Rajkhaswan-Nayagarh-Bolani section of the Chakradharpur division of South Eastern Railway to achieve a 3000MT loading target on an EPC mode," as detailed in a regulatory filing by the company.

RVNL, one of the railway stocks that surged prior to the Union Budget 2024, experienced a sharp decline post-budget due to the limited focus on the railway sector.

Investors had anticipated significant funding for the railways, but Finance Minister Nirmala Sitharaman's budget speech barely mentioned the sector, causing a notable drop in the stock prices of RVNL, Ircon International, IRFC, RailTel, and others.

Elara Capital analysts noted that despite maintaining capital expenditure (Capex), the initial excitement in sectors such as Aerospace & Defense, Railways, Infrastructure, and Shipbuilding is expected to wane as the focus shifts to execution.

RVNL's stock closed slightly higher at ₹592.50 on the National Stock Exchange (NSE) in the last session. The stock has soared over 220% this year and over 357% in the past year, thanks to improving fundamentals.

RVNL's profitability has seen significant growth, with profit after tax increasing from ₹790 crore in FY19 to over ₹1,640 crore in FY24 due to large infrastructure orders from the government. Additionally, the company continues to secure more infrastructure deals domestically and internationally.

RVNL's order book stands at around ₹65,000 crore, with an annual target for order inflow of ₹25,000 crore. Analysts believe that expanding infrastructure projects, strategic collaborations, and a consistent execution track record position RVNL for significant growth.

Technically, RVNL's relative strength index (RSI) is at 66.1, indicating it is neither overbought nor oversold. RVNL shares are trading higher than the 20-day, 30-day, 50-day, 100-day, 150-day, and 200-day moving averages but lower than the 5-day and 10-day moving averages.

However, RVNL faces risks including project execution delays, dependence on government contracts, regulatory changes, economic slowdowns, funding challenges, increased competition, and cost overruns, all of which could negatively impact its profitability.

Bloomberg data shows that the stock has a 'hold' rating from three analysts with no buy or sell recommendations.

“This continues from our letter no. RVNL/SECY/STEX/2024 dated 21.06.2024. As per Regulation 30 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, Rail Vikas Nigam Limited has received a Letter of Acceptance from SER HQELECTRICAL/SOUTH EASTERN RAILWAY for the 'Design, Supply, Erection, Testing & Commissioning of a 132 KV Traction Substation, Sectioning posts (SPs), and Sub sectioning posts (SSPs) in a 2x25KV System on the Rajkhaswan-Nayagarh-Bolani section of Chakradharpur division of South Eastern Railway to achieve a 3000MT loading target on EPC mode,'” the firm communicated to bourses.