RVNL shares fell nearly 2 per cent on July 25 despite the company receiving a Letter of Acceptance (LoA) for a project worth Rs 191.53 crore from South Eastern Railway.
The project involves the design, supply, erection, testing, and 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.
RVNL shares ended 0.46% higher on Wednesday on BSE. A total of 20.70 lakh shares of RVNL changed hands amounting to a turnover of Rs 123.21 crore. Market cap of RVNL climbed to Rs 1.23 lakh crore on BSE.
RVNL shares have a one-year beta of 1.3, indicating high volatility during the period.
The stock fell to a 52-week low of Rs 119.75 on July 28, 2023 and hit a record high of Rs 647 on July 15, 2024.
In terms of technicals, the relative strength index (RSI) of RVNL stands at 66.1, signaling it’s trading neither in the overbought nor in the oversold zone. Rail Vikas Nigam shares are trading higher than the 20 day, 30 day, 50 day, 100 day, 150 day, 200 day but lower than the 5 day and 10 day moving averages.
The project has to be completed in 18 months.
“This is in continuation to our letter no. RVNL/SECY/STEX/2024 dated 21.06.2024. In terms of Regulation 30 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, it is hereby informed that Rail Vikas Nigam Limited has received a Letter of Acceptance from SER HQELECTRICAL/SOUTH EASTERN RAILWAY for “Design, Supply, Erection, Testing & Commissioning of 132 KV Traction Substation, Sectioning post (SPs), and Sub sectioning post (SSPs) in 2x25KV System on Rajkhaswan- Nayagarh-Bolani section of Chakradharpur division of South Eastern Railway to meet 3000MT loading target on EPC mode,” said the firm in a communication to bourses.
What Should Investors Do?
Experts recommend there was very little focus on the Railways, which had been a key area of focus for the government in the past. Finance Minister Nirmala Sitharaman in her Budget speech made no sector-specific allocation for Railways.
Current Price: Rs 581
Downside Risk: 12.6%
Support: Rs 558
Resistance: Rs 616; Rs 645
RVNL stock seems to be precariously placed on the daily chart, with price-to-moving averages action remaining favourable and select momentum oscillators showing negative crossover.
To simplify things, the stock needs to sustain above Rs 616 levels on a weekly closing basis for the current uptrend to continue. Meanwhile, the daily chart shows near support for the stock around 558 levels, below which it can test its 20-DMA (Daily Moving Average) support around Rs 533 levels. The long-term bias for the stock is likely to remain positive as long as the stock holds above its breakout price of Rs 490. On the upside, the recent highs around Rs 645 levels will act as a resistance for the stock.
It is worth noting that RVNL was among the multibagger railway stocks that experienced a sharp decline following Union Budget 2024 as there was limited focus on the sector.
According to analysts at Elara Capital, even though capital expenditure (Capex) was retained, the initial euphoria in sectors such as Aerospace & Defense, Railways, Infrastructure, and Shipbuilding is expected to temper as focus shifts from enthusiasm to execution.
Its profitability has grown significantly as its profit after tax rose from Rs 790 crore in FY19 to over Rs 1,640 crore in FY24 due to bagging huge infrastructure orders from the government. Additionally, the company has continued to attract more infrastructure deals in India and other countries.
RVNL has an order book of around Rs 65,000 crore, plus every year the company has a target for an order inflow Rs 25,000 crore. Expanding infrastructure projects, strategic collaborations, and consistent execution track record position it for significant growth, according to analysts.
However, it faces risks including project execution delays, reliance 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 and zero buy or sell calls.
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