Jefferies has initiated coverage on India's railway stock space with a constructive outlook, driven by a sustained upcycle in railway capital expenditure. The brokerage expects 10% CAGR in rolling stock capex between FY26 and FY30, led by strong investments in passenger and metro coaches.
Within this, passenger and metro segments are projected to grow at 9-16% CAGR, supported by government-led modernisation, safety upgrades, and expansion of high-speed and urban transit networks. In contrast, wagon demand is expected to remain relatively modest at 5% CAGR, reflecting a more measured cargo growth trajectory.
Titagarh Rail Systems: Preferred Play on Passenger Growth
Jefferies has initiated Titagarh Rail Systems with a Buy rating and a target price of Rs 810, implying 32% upside. The brokerage expects Titagarh to deliver a robust 43% EPS CAGR over FY26-30, significantly outpacing peers. This growth is anchored in:
- Strong order book visibility in passenger rail systems
- Rising share of higher-margin passenger rolling stock
- Operating leverage from improving capacity utilisation
Additionally, India's push toward Vande Bharat trains and metro expansion is expected to drive sustained demand for passenger coaches-areas where Titagarh has a strong foothold. Jefferies also sees margin expansion potential as the company moves up the value chain, with return ratios expected to improve meaningfully over the next few years.
Jupiter Wagons: Growth Intact, Valuations Stretch
In contrast, Jefferies has initiated Jupiter Wagons with an Underperform rating and a target price of Rs 200, indicating 22% downside. While the company is expected to deliver a healthy 23% EPS CAGR over FY26-30, the brokerage flags concerns around its higher exposure to wagons, a segment with relatively slower growth visibility.
At current valuations of 40x FY27E earnings-similar to Titagarh-Jefferies believes Jupiter's growth outlook does not justify the premium. The brokerage also highlights that upside could hinge on a sharp pickup in wagon orders or improved profitability from its wheel manufacturing joint venture.
Modernisation Tailwinds to Drive Sector
The broader rail sector outlook remains underpinned by structural drivers. Indian Railways' focus on modernisation-particularly through Vande Bharat trains and safety upgrades-is expected to accelerate passenger coach investments. At the same time, dedicated freight corridors and logistics demand will support steady wagon demand, albeit at a slower pace than passenger segments.
With both stocks trading at similar valuation multiples, Jefferies clearly prefers Titagarh for its stronger earnings trajectory and better positioning in high-growth segments.
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