Rail Vikas Nigam - Order Book Provides Strong Visibility; Reasonable Valuation: HDFC Securities
The mgmt expects revenue to grow at CAGR of over 20% in the coming few years on the back of strong order book, new order inflows.
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HDFC Securities Retail Research
Rail Vikas Nigam Ltd. follows an asset light business model, which helps keep its fixed asset part lower, helping it to keep its balance sheet stress free, and resulting in lower inventory days.
The company is a project executing agency working for and on behalf of Ministry of Railways and has a strong order book visibility which is likely to play a key role in the development of railway infrastructure in India.
RVNL has diversified into non-railway projects and looking to bid for projects in other countries as well. It has also commenced consultancy services which could lead to margin expansion.
Its experienced management and execution team gives it a competitive advantage which has contributed significantly in increasing its project execution capabilities.
The Government has recently shown intention to introduce competition among public sector undertakings for allotment of work by the railway board. This could impact order flows to some extent.
The thrust on improving the infrastructure for rail transportation by adding new lines, doubling existing lines, electrification, etc. would continue to provide constant flow of business for the company.
RVNL has a robust balance sheet and is available at an attractive dividend yield of ~2.5%. Execution of larger projects on a low base could propel growth higher in coming years.
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