Titagarh Rail Gets Target Price Cut From Morgan Stanley On Lower Earnings Forecast
Titagarh Rail Systems Ltd. stock received a target price cut from multinational brokerage firm Morgan Stanley as it projects slower earnings growth and delayed delivery of Vande Bharat coaches.
The target price has been reduced to Rs 1,017 from Rs 1,027 earlier. The revised target implies a 23% upside to the last closing price. The stock currently trades at 26 times the FY27 price-to-earnings.
The brokerage projects Titagarh Rail's earnings to decline by 27% in the current financial year, fall 9% in fiscal 2027 and rise 2% in FY28. This reflects slower execution in the freight segment.
"Our valuations methodology remains unchanged. We also incorporate preferential equity issuance to promoters," it added.
Morgan Stanley also anticipates delayed delivery of Vande Bharat coaches and new metro coach orders. "Freight is a larger business and hence EPS sensitivity is higher on EPS FY26-28e. We forecast a 24% EPS CAGR, F26-28e," it added.
Morgan Stanley assumes execution of 120,304, and 392 coaches in FY26,FY27 and FY28e implying passenger contribution to Ebit rises from 3% in FY25 to 40% in FY28e.
According to the brokerage, the execution slipped at Bengaluru in Q1 and management expects this to ramp up in 2H. Further, we expect Gujarat metro to commence execution from Q3FY26 onward, and the recent win of Mumbai Line 6 and Pune-II are slated to commence from Q3FY27 and Q1FY28, respectively.
Morgan Stanley has pushed out the expected delivery of the first train, from June 25 and March 26, in line with guidance. "As, there have been design configuration changes in Vande Bharat, from 16-coach to 24 coach train configuration at the behest of Indian Railways," it noted.
Titagarh's order book is at 10,772 wagons as of Q1, which implies revenue visibility of 12 months, as per Morgan Stanley. "A wheelset supply shortage at Indian Railways has hampered execution, thereby affecting freight revenue in the interim," the brokerage added.
