Rail Vikas Nigam Limited (RVNL), a state-owned enterprise, plays a crucial role in India’s railway infrastructure development. The company is responsible for project development, financing, and implementing projects related to rail infrastructure.
RVNL is also tasked with mobilising financial and human resources to ensure the swift execution of these projects.
Recently, RVNL shares have faced significant pressure following the release of their Q1 FY2024 results. The stock has dropped over 9% across two sessions, leading to investor concerns. In this article, we’ll break down RVNL’s recent financial performance and explore whether this dip presents a buying opportunity for long-term investors.
RVNL’s Q1 FY2024 performance
RVNL reported a substantial drop in its consolidated net profit for the first quarter ending June 2024. The company’s net profit fell by 35% year-on-year (YoY) to ₹224 crore, down from ₹343 crore in the same quarter last year.
Revenue from operations also took a hit, declining 27% YoY to ₹4,074 crore, compared to ₹5,572 crore in Q1 FY2023.
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RVNL’s EBITDA and profit margins decline
The company’s earnings before interest, taxes, depreciation, and amortisation (EBITDA) dropped 48% YoY to ₹189 crore, a significant decrease from ₹349 crore in the same period last year. This sharp decline in EBITDA led to a reduction in profit margins, which fell by 180 basis points to 4.5%.
RVNL’s Q1 sequential comparison
When comparing the Q1 results to the preceding quarter, the situation looks even more concerning. On a sequential basis, RVNL’s net profit dropped by 53%, falling from ₹478 crore in the March 2024 quarter.
Revenue from operations also decreased by 39% quarter-on-quarter (QoQ) from ₹6,714 crore in the previous quarter.
Market reaction
Following the release of these disappointing results, RVNL shares have nosedived. The stock fell by 4.5% to ₹514 on the Bombay Stock Exchange (BSE) on Friday, extending the losses from the previous day when it dropped by 5%.
The stock hit an intraday low of ₹515.40 on the National Stock Exchange (NSE), marking a 9% decline from its recent high of ₹566.
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Technical analysis
From a technical standpoint, RVNL shares are currently trading below their 5-day, 10-day, 20-day, and 30-day simple moving averages (SMAs), although they remain above the 50-day, 100-day, 150-day, and 200-day SMAs.
The relative strength index (RSI) of the stock is at 47.9, which is in the neutral zone, indicating neither overbought nor oversold conditions. However, the moving average convergence divergence (MACD) stands at -33.3, signalling potential bearish momentum.
Analyst opinions
Despite the recent downturn, some market experts believe that the dip in RVNL shares could present a buying opportunity for long-term investors. Seema Srivastava, a Research Analyst at SMC Global Securities, attributes the poor Q1 performance to a policy paralysis during the Lok Sabha elections.
She expects the company to recover in the coming quarters, particularly with the formation of the new government.
Ganesh Dongre, Senior Manager of Technical Research at Anand Rathi, notes that RVNL’s share price is currently in a falling pattern within the ₹495 to ₹590 range. He advises existing shareholders to maintain a stop loss at ₹495 and suggests that new investors wait until the stock stabilises before considering entry.
RVNL Quarterly results (Amount in Rs. Cr):
| Quarterly | Jun 2024 | Mar 2024 | Dec 2023 | Sep 2023 | Jun 2023 |
| Sales | 4,064 | 6,700 | 4,675 | 4,909 | 5,446 |
| Other Income | 262 | 279 | 326 | 296 | 280 |
| Total Income | 4,326 | 6,979 | 5,002 | 5,206 | 5,726 |
| Total Expenditure | 3,895 | 6,249 | 4,434 | 4,618 | 5,104 |
| EBIT | 431 | 730 | 567 | 587 | 622 |
| Interest | 137 | 150 | 138 | 132 | 146 |
| Tax | 76 | 145 | 102 | 84 | 142 |
| Net Profit | 217 | 433 | 325 | 370 | 333 |
RVNL’s long-term prospects: A potential recovery ahead?
RVNL has been a strong performer in the stock market over the past year, reaching an all-time high of ₹647 in July 2024, representing an 873% increase from its March 2023 close of ₹68.60. Although the stock has since experienced profit-taking and is now trading 17% lower than its peak, it is still up 341% from its 52-week low of ₹122.
Market analysts remain cautiously optimistic about RVNL’s long-term prospects. The company is expected to benefit from the government’s continued focus on infrastructure development, which could support future growth.
For investors with a high-risk appetite and a long-term investment horizon, the current dip in RVNL shares might be an opportunity to accumulate the stock on every 5-7% decline.
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Conclusion
RVNL’s disappointing Q1 FY2024 results have led to a sharp decline in its share price, causing concern among investors. However, the long-term outlook for the company remains positive, particularly with expectations of a recovery in the coming quarters as the new government settles in.
Investors should consider their risk tolerance and investment horizon before making any decisions. Those with a long-term view might see this as a chance to buy on dips, while others may prefer to wait for the stock to stabilise before entering the market.
