Multibagger stock Texmaco Rail & Engineering slumps 6% on profit booking. Is this a buy opportunity?

Multibagger stock: Texmaco Rail & Engineering share price has surged by over 260%, providing investors with substantial gains. Nuvama Institutional Equities, a domestic brokerage, initiated covering lately with a target price of ₹331 and a "buy" rating. The brokerage emphasised that Texmaco Rail (Texmaco) is undergoing a remarkable rejuvenationfollowing a difficult few years, supported by rising railway capital expenditures, strong wagon ordering (wagon order accretion over FY23–24 being approximately 75% higher than that over FY14–22), and a net cash balance sheet (cash greater than debt).

On Tuesday's session, Texmaco Rail & Engineering share price was down nearly 6% trading at ₹271.35 apiece on BSE. Texmaco Rail & Engineering share price today opened at ₹288.10 apiece, the stock touched an intraday low of 269.20, and an intraday high of ₹291.10 apiece on BSE.

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“After the recent splendour run, prices are witnessing a profit booking session and are down more than 4%. This is due to the overbought conditions of RSI. While the profit booking can continue, this would be a buying opportunity. The next support is at 250 and 300 as resistance,” said Rajesh Bhosale, Equity Technical and Derivative Analyst at Angel One.

Furthermore, Nuvama noted that there are several factors that could cause the stock to rerate, including: i) operating margins and working capital improvement (which is currently under way but will take time to complete); ii) the potential demerger of the rail EPC business, which would leave Texmaco with the capital-light wagons, OHE, and components business; and iii) the ramp-up of the component business. The brokerage believes that these triggers will progressively come into play over the coming years, leading to a significant increase in the company's earnings.

The brokerage identified a slowdown in the growth of railroad capital expenditures and freight as the main concern.

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Investment Rationale

Regarding the investment rationale, the brokerage considers Texmaco Rail & Engineering to be a seasoned rail participant with a wealth of options.

The brokerage considers it to be a leading producer of rolling stock for railroads with a track record of excellent performance. Additionally, the wagon segment's intrinsic risk of cyclicality is reduced by its varied presence. Furthermore, there are big plans to increase production capacity for wagons, steel foundries, and componentry in order to take advantage of new prospects both in India and abroad(export).

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Texmaco Rail & Engineering - Company details

Texmaco began as a manufacturer of textile machines and was formed in 1939. Later, the firm expanded into additional engineering specialties, and it now has a broad range of business lines, including steel castings, hydro-mechanical equipment, bridges, wagon manufacture, components and assemblies, and structural equipment. Across 155 acres, Texmaco has amassed a robust infrastructural base over the years, with five production plants in the Kolkata suburbs of Agarpara, Belgharia, Sodepur, and Panihati.

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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.