One of the lesser-known companies on our bourses is hogging all the investors' attention as the share has been surging non-stop for the past two weeks. The shares of Rail Vikas Nigam Limited (RVNL) have seen a growth of over 300% in the past 1 year!!

For the unversed, RVNL is an Indian PSU which was incorporated in 2003 to implement the National Rail Vikas Yojana as a 100% subsidiary of the Ministry of Railways. The company executes projects on behalf of the government as a Government Company as its main objectives are to undertake rail project development, mobilize financial resources, implement rail projects pertaining to strengthening of golden quadrilateral and port connectivity and raise extra-budgetary resources for project execution.

 

The stock of RVNL has been seeing a lot of growth as the stock has gained over 100% in a single month. Moreover, the stock has gained the status of ‘Navratna’ which brings the added benefits of greater delegation of powers, enhanced operational freedom and higher financial autonomy.

But what is driving such growth? There are three main reasons for such growth: -

 

  • RVNL has emerged as the lowest bidder for three underground packages of the Chennai Metro Rail Limited (CMRL) phase-II project, worth Rs 3,146 crores.
  • RVNL-SCC joint venture has emerged as the lowest bidder for Mahi Bajaj Sagar Project, Banswara (Rajasthan), worth Rs 2,249 crores.
  • The receipt of the Navratna status, making RVNL India’s 13th Navratna.

What is the future outlook of  RVNL?

For the quarter and period of 9 months ended in December 2022, the company’s revenues saw a marginal decline as the same stood at Rs 5,012.09 crores while its profits grew 31% to Rs 382.42 crores against Rs 293 crores reported in the corresponding period last year.

 

Technically, the stock is trading well above its 5,20,50,100 and 200-day averages as its RSI is well overbought i.e. above the 80 RSI mark. The stock has been in a strong uptrend since April but Monday saw the stock reverse from the Rs 140 level as the stock appears to have a strong resistance at that level.

 The stock has shown good growth in operating profit YoY as the company will benefit from the government’s push for capex. Moreover, since Railways are considered an important part of the government’s infrastructure spending, RVNL will stand to gain in the future.

Brokerages believe that the stock is not a good buy at the persisting prices since it is well overbought. They recommend investors to buy the stock when the stock declines below the Rs 100 mark. Most brokerages recommend a Buy-on-Dip strategy where investors could buy the share when the prices correct. After seeing rejection at the Rs 140 level, the stock could see further correction before bulls can take charge any further.