Titagarh Rail's Target Price Cut On Execution Delay, Weak Order Inflow

Titagarh Rail Systems Ltd.'s target price was slashed by Morgan Stanley, owing to the near-term weakness in order inflow and execution challenges.

The brokerage lowered the target price to Rs 1,090 from Rs 1,300 per share. But it maintained its 'overweight' rating due to the large addressable market and limited private competition.

Titagarh is a beneficiary of robust rail capex, but ordering so far remains subdued. Near-term execution challenges also affect the revenue trajectory, according to analysts.

Inadequate wheel sets from Indian Railways constrain third quarter offtake. There was an execution delay in Vande Bharat, specifically by nine months. This delay was caused by a change in car design plan, Morgan Stanley noted.

The railway budget is maintained at the Rs 2.65 lakh crore mark, with physical targets for wagons and coaches increasing 27% and 20%, respectively.

This, indicates encouraging long-term prospects for rolling stock companies, according to Morgan Stanley. However, this is against the anticipation of a pickup in tendering in the second half of the year.

So far Indian Railways' ordering has remained dull, according to the brokerage. Titagarh's freight order intake stood at Rs 1,100 crore in the first nine months of the financial year 2025. However, the passenger segment has won no orders since the last project win in October 2023, Morgan Stanley said.

In the freight segment during the third quarter, wagon volume was over 6% year-on-year, against over 12% estimates. The monthly run rate of freight was at 740 wagons.

Lower production reflects inadequate supply of wheel sets from Indian Railways' wheel factory, the brokerage said. According to management, this has persisted so far in the fourth quarter too, with Indian Railway extending delivery timeline and allowing usage of imported wheels. This affects freight revenue in the interim, said Morgan Stanley.

In the passenger segment, Titagarh has an order book for 1,589 coaches, of which, execution has commenced for Bangalore metro. This order is of 204 coaches.

However, change in design configuration in Vande Bharat from 16-coach to 24-coach trains has pushed delivery of the first train from June 2025 to March 2026, the brokerage said. This is a 1,280-coach order book, it notes. Further, execution on the Ahmedabad metro will now begin in the first quarter of financial year 2026 onwards and the Surat metro thereafter.