TEXRAIL - Texmaco Rail & Engineering Limited Share Price

In the Q1 FY '26 earnings call, Texmaco Rail & Engineering Limited's management provided a comprehensive outlook indicating a recovery from recent challenges. The company reported revenue from operations of INR 911 crores, with an EBITDA of INR 79 crores (8.7% margin) and a profit after tax of INR 29 crores (3.2% margin). The current order book is substantial, standing at INR 7,053 crores, which is anticipated to ensure strong execution visibility in the coming quarters.

Management highlighted the recovery phase from the prior short supply of wagon wheel sets from Indian Railways and an operational hiccup experienced by an acquired entity, Texmaco West. Management expressed optimism about revenue normalization in future quarters due to the improvement in supply chains and strong demand signals.

Key forward-looking points include:

• Continued strong order inflows from domestic and international markets, reinforcing Texmaco's leadership in freight rolling stock.
• Plans to capitalize on India's rail infrastructure expansion, backed by public investments in related projects.
• A major 20-year maintenance contract secured in Africa and traction-related orders from the Middle East aimed at enhancing international market presence.
• Significant collaboration through a MoU with Rail Vikas Nigam Limited to enhance capabilities in technology-driven projects.
• Ratings upgrade by CARE to a stable rating of CARE A for long-term bank facilities, illustrating increased market confidence in financial stability.

Management maintained guidance, expecting to surpass FY '25 levels, with continued growth expected across various business verticals and a target for EBITDA margins to improve towards the lower teens. Overall, Texmaco remains committed to leveraging its operational strengths and strategic investments for future growth.

Q&A Section from the Earnings Transcript

Question 1: Can you help us in terms of guidance for FY '26? Can it surpass the FY '25 levels?
Answer: As per our guidance for the year, we firmly believe our performance won't be adversely affected. We anticipate surpassing previous levels thanks to normalizing supply from Indian Railways, which has previously hampered our output.

Question 2: How is the order pipeline looking for both private and Indian Railways, and how do margins compare with domestic orders?
Answer: There's positive traction across all our business verticals, and we expect renewed demand from both the railway and private sectors. Our international markets are also promising. While margins do vary, we believe our recent results reflect a strong overall position.

Question 3: Can you shed light on the MoU with RVNL? What contribution can we expect going ahead?
Answer: I can't provide specific details on value for the MoU with RVNL. However, it's a strategic partnership that aims to enhance synergy and could potentially be a game-changer for Texmaco in several product lines and services.

Question 4: Are we still on track for FCD growth of 35%-40% this year despite initial degrowth?
Answer: Yes, we maintain our guidance and believe in our long-term business cycles, despite the degrowth seen in the first quarter. The momentum we've built over the years supports our confidence in achieving our targets.

Question 5: When do you expect to see those EBITDA margins cross into double digits?
Answer: We expect an upward movement towards lower double digits in EBITDA margins. Despite last quarter's challenges, we believe improvements will manifest in the coming months.

Question 6: How much of the 1,815 wagons delivered was contributed by Texmaco?
Answer: Texmaco contributed approximately 240 wagons to the total delivered during the quarter, which underscores our ongoing commitment to meeting market demands.

Question 7: What is the expected margin difference between private and normal wagons supplied to Indian Railways?
Answer: While I can't specify exact numbers, private wagons generally carry a premium due to their specialized designs and requirements. Typically, prices range from INR 35 lakhs to INR 70 lakhs depending on specifications.

Question 8: When will the 40,000-tonne Odisha foundry become operational?
Answer: There's currently no defined timeline for that facility. We are focused on ramping up existing capacities and will assess funding for the Odisha project based on market demands.

Question 9: What's the current order book status?
Answer: As of July 1, our order book stands at approximately INR 8,500 crores, reflecting strong demand and our ability to secure contracts across various verticals.

Question 10: What are your EBITDA margin targets for FY '26?
Answer: Our target remains in the lower double digits. While specific figures may vary, we are confident in achieving sustained growth and improvement in margins throughout the year.

Question 11: Can you give details regarding the amalgamation of Texmaco West?
Answer: We received the NCLT order for the amalgamation, and we expect it to be finalized within 10-15 days. The effective date will be April 1, 2025, streamlining our operations.

Question 12: How do you view government initiatives in the leasing space for rolling stock?
Answer: While there are some government initiatives in leasing, the direct leasing from Indian Railways remains unclear. Current market dynamics see us actively engaging in specialized services related to freight rolling stock.

Question 13: Why have we not expanded into wheel set production despite sourcing challenges?
Answer: Investing in production requires a careful evaluation of market demand. While there's potential, we are currently assessing whether our investment would yield satisfactory returns given existing global supplies.

Question 14: What is the revenue potential for the components and railway castings business?
Answer: We expect growth in this area, with potential reaching up to 3-5 times in two to three years via expanding our market reach and developing new product lines, which are crucial for our growth strategy.

Question 15: Could you detail the capacity increases and new markets targeted?
Answer: We are expanding capacity by targeting both automobile and mining sectors, which presents new opportunities. Our strategy is focused on value-added services rather than simply commodity products, allowing us to tap into specialized markets.