RVNL Shares Tanks 13% After Hitting One-Year High; Should you Buy or Book Profits?

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RVNL Share Price: Rail Vikas Nigam (RVNL) shares have given stellar returns in a four-day run-up. However, shares of RVNL saw some profit booking on Wednesday as the stock plunged sharply after big initial gains and turned negative. In the initial trading session, RVNL hit new 52-week highs amid the heavy trading volumes. However, the stock saw severe selling pressure within just a few minutes.

RVNL, which company is engaged in railway projects including setting up of new lines, doubling, gauge conversion, railway electrification, metro projects, major bridges, workshops, construction of cable stayed bridges and institution buildings, has been in news after Union Minister Raosaheb Danve said efforts are on to start the Vande Bharat train production by August.

RVNL mostly works on a turnkey basis and undertakes the full-cycle of project development from conceptualisation to commissioning including stages of design, preparation of estimates, calling and award of contracts, project and contract management, etc.

RVNL 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. RVNL is a project executing agency working for and on behalf of MoR (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.

The management expects revenue to grow at CAGR of over 20 per cent in the coming few years on the back of strong order book and new order inflows.

Last month, a joint venture of Russian firm Transmashholding (TMH) and RVNL emerged as the lowest bidder for the manufacture and maintenance of 200 lightweight Vande Bharat trains. The consortium made a bid of around Rs 58,000 crore, with the cost to manufacture one train set at Rs 120 crore.

Earlier, this month, RVNL in consortium with Siemens India, emerged as the lowest bidder (L1) for Mumbai Metro line 2B of Mumbai Metropolitan Region Development Authority (MMRDA). The project is estimated to cost around Rs 378.16 crore.

Share Price History

Shares of RVNL have surged about 55 per cent in the last five sessions before the profit booking trimmed its gains. The stock has risen 75 per cent in the last one month, while it is up 180 per cent in the last six-month period. The stock has surged about 200 per cent in the last one year.

Incorporated in 2003 by the Ministry of Railways India, Rail Vikas Nigam is a project executing agency. RVNL is engaged in the business of mobilization of financial resources, rail project development, enhancing golden quadrilateral and port connectivity by implementing rail projects and raising extra-budgetary resources for Indian Railway project execution.

RNVL was listed at the bourses in April 2019 as the Government of India raised about Rs 482 crore from its initial public offering. The government sold more than 25.34 crore equity shares with a face value of Rs 10 each for Rs 19 apiece. From its issue price, the stock has delivered multibagger returns of more than 500 per cent.

As per Trendlyne data, the average target price of RVNL is Rs 61, which shows a downside of 42% from the current market prices. The consensus recommendation from two analysts for Rail Vikas Nigam is a strong buy.

Technically, RVNL is trading above eight out of eight SMAs. The day RSI (14) is 80.8. The RSI above 80 is considered strongly overbought. This implies that the stock may show a pullback. MFI is 89.6, and MFI above 80 is considered strongly overbought.

What Should Investors Do?

“RVNL’s stock is experiencing a strong upward momentum, as indicated by its record high price. Furthermore, higher timeframe charts reveal a breakout with rising volumes, suggesting that there is a significant long build-up behind the current prices,” Vidnyan Sawant, AVP – Technical Research at GEPL Capital said.

One can book partial profits here and ride the rest of the trend till Rs 120 levels, while the stop-loss must be 98 on the closing basis, he advised.

Disclaimer:Disclaimer: The views and investment tips by experts in this News18.com report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.

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