Overview of RVNL and Ircon’s Q2 FY25 Performance
Railway stocks, particularly Rail Vikas Nigam Ltd (RVNL) and Ircon International Ltd (Ircon), took a hit following their Q2 FY25 financial performance. Shares of both companies saw a sharp decline of approximately 7%. While RVNL’s shares dropped to around ₹443 per share, Ircon’s shares dipped to ₹202.45, impacting their year-to-date performance and leaving many investors re-evaluating their positions. Despite their strong run-up earlier in the year, with RVNL gaining as much as 180% over the past 12 months, the recent quarterly results highlighted weaknesses that have sparked renewed concerns.
RVNL’s Q2 Performance Breakdown
RVNL posted disappointing numbers for the September quarter (Q2 FY25), reflecting a slowdown in both profit and revenue growth:
- Net Profit: ₹286.88 crore, down 27.24% YoY from ₹394.26 crore.
- Revenue from Operations: Decreased by 1.21% to ₹4,854.95 crore.
- EBITDA: Fell to ₹256 crore, a 14% drop compared to Q2 FY24, with a reduction in margins to 5% from 6%.
Despite these year-on-year declines, the company did see improvements in a sequential quarter-on-quarter view, with profit increasing by 28.12% and revenue rising 19.18%.
Also read: Rail Vikas Nigam Ltd (RVNL) rides high with ₹ 65,000 crore order book
Ircon’s Q2 Results and Market Reaction
Ircon also reported a YoY decline in profits and revenue, although it managed a QoQ improvement:
- Net Profit: Down to ₹206 crore, an 18% decrease from ₹250.7 crore YoY.
- Revenue from Operations: Fell 19.3% YoY to ₹2,447.5 crore.
- EBITDA: ₹201 crore, marginally down from ₹216 crore YoY but with a slight improvement in operating margin to 8% from 7%.
The market reaction was swift, as both stocks saw significant pullbacks, reflecting investor concern about the companies’ slowing performance amid broader infrastructure growth targets.
You may also like: RVNL shares tumble after Q1 earnings
Value Insights: Comparing Key Metrics
| Metric | RVNL Q2 FY25 | Ircon Q2 FY25 |
| Net Profit (YoY) | ₹286.88 crore | ₹206 crore |
| Profit Decline (YoY) | -27.24% | -18% |
| Revenue (YoY) | ₹4,854.95 crore | ₹2,447.5 crore |
| Revenue Decline (YoY) | -1.21% | -19.30% |
| EBITDA | ₹256 crore | ₹201 crore |
| EBITDA Margin | 5% | 8% |
Broader Market Impact on Railway Stocks
The recent poor performance in Q2 is part of a broader trend seen across railway stocks. RVNL and Ircon are down 42% and 31% from their respective peaks earlier this year. RVNL’s shares, for instance, dropped from an all-time high of ₹647 in July to current levels around ₹443.
In comparison:
- August: RVNL shares dropped 10%.
- September: The stock saw another 12.5% decline.
- October: The downward trend continued with an 11.25% drop.
Similarly, Ircon shares have seen 10% drop in August, followed by 12.7% in September, and 4.52% in October.
You may also read: On the right track: Investing in India’s railway revolution
Why Are Railway Stocks Feeling the Pressure?
Missed Earnings Expectations
Investors in railway stocks have high expectations due to the consistent government push on infrastructure growth. However, both RVNL and Ircon’s Q2 performance fell short of analyst estimates, highlighting challenges in maintaining their earnings trajectory.
High Valuation Adjustments
Both companies saw significant price appreciation earlier in the year, driven by strong investor interest in railway and infrastructure-related stocks. RVNL, for example, joined the MSCI Global Standard Index in August, elevating its profile among institutional investors.
Sector-Wide Weakness
Infrastructure and capital expenditure growth are key themes for India’s economic development, but rising interest rates and inflationary pressures are impacting margins and project costs, which in turn affect bottom lines. This could make it harder for these stocks to maintain their previously high valuations.
Future Prospects: Can RVNL and Ircon Rebound?
Despite short-term pressures, the long-term growth prospects for RVNL and Ircon remain promising due to India’s focus on expanding transportation infrastructure. Projects like PM Gati Shakti, Bharatmala, and Sagarmala indicate sustained government investment in railways, which may positively impact these stocks over the longer term.
Final Thoughts for Investors
While Q2 FY25 results have introduced volatility in RVNL and Ircon stocks, the fundamentals of infrastructure growth in India remain intact. For investors willing to weather short-term fluctuations, the current price corrections could present an entry point, particularly given the government’s emphasis on developing transportation infrastructure.
