Best Railways stocks in 2023

Finance Minister Nirmala Sitharaman on the 1st of February 2023, allocated Rs 2.40 lakh crore for the Railways for 2023-24. The outlay is Rs 1 lakh crore more than the Rs 1.40 lakh crore allocated to the Railways last fiscal. This allocation will be spent on laying new lines with an aim to decongest the Indian Railways and make it future-ready. It is estimated that there is a need to lay 1 lakh kilometers of tracks (including doubling of existing ones) over the coming 25 years as more goods movement shifts away from roads to railways. Let’s see which are the best railways stocks that can be affected by this expansion.

RAILWAYS INDUSTRY OVERVIEW

India’s railway system has played a fundamental role in the country’s development, transporting people and goods throughout its vast territory, integrating markets, and connecting communities. Rail passenger traffic in India has increased by almost 200% since 2000 and freight traffic by 150%, yet latent demand for mobility in India remains huge.

Global demand for transport is growing fast. Given present trends, passenger and freight activity will more than double by 2050. Most conventional rail networks today are located in North America, Europe, China, Russia, India, and Japan. These regions make up about 90% of global passenger movements on the conventional rail with India leading at 39%.

GLOBAL RAILWAYS INDUSTRY

The Future of Rail examines how the role of rail in global transport might be elevated as a means to reduce the energy use and environmental impacts associated with transport. Rising incomes and populations in developing and emerging economies, where cities are growing exponentially, are set to lead to strong demand for more efficient, faster, and cleaner transportation transport.

The global rail transport market grew from $505.41 billion in 2022 to $538.55 billion in 2023 at a compound annual growth rate (CAGR) of 6.6%. The Russia-Ukraine war disrupted the chances of global economic recovery from the COVID-19 pandemic, at least in the short term. The war between these two countries has led to economic sanctions on multiple countries, a surge in commodity prices, and supply chain disruptions, causing inflation across goods and services and affecting many markets across the globe. The rail transport market is expected to grow to $677.78 billion in 2027 at a CAGR of 5.9%. Some of the best railway stocks in the USA include Trinity Industries, Greenbrier Companies, CSX Corp etc.

The passenger rail segment led the market with a share of 58.7% of the global revenue in 2021. The segment is projected to witness growth over the coming years as the tourism industry picks up speed thanks to inexpensive passenger train fares.
The agriculture segment held the largest share of 34.2% in the railroad market in terms of revenue in 2021. Stable and efficient railroad service is especially crucial for the agriculture industry.
The mining segment is expected to register the fastest CAGR over the forecast period to overtake the agriculture segment in terms of market size by 2030.

INDIAN RAILWAYS INDUSTRY

India’s railway system has played a fundamental role in the country’s development, transporting people and goods throughout its vast territory, integrating markets and connecting communities. Rail passenger traffic in India has increased by almost 200% since 2000 and freight traffic by 150%, yet latent demand for mobility in India remains huge.

The Indian Railways consists of a total track length of 126,366 km over 67,956 km of the route along with 7,335 stations. The railways operate 13,523 passenger trains and 9,146 freight trains daily. The railway sector in India has loaded 1418.1 MT of freight during FY 2021-22, registering a 15% increase in freight loading from the last year. Indian Railways is the single largest employer in India and the eighth largest in the world, employing approximately 1.3 Mn people.

Indian Railway network is growing at a healthy rate. In the next five years, Indian railway market is expected to be the third largest, accounting for 10% of the global market.

Considering the huge growth potential of the Railways industry, its appropriate to have a look on the best Railway stocks of India.

Crucial Announcements by the Government

The government allocated Rs. 140,367.13 crores (US$ 18.40 billion) to the Ministry of Railways.
Indian Railways has logged the highest-ever electrification of sections covering 6,015 Route Kilometer (RKM) in a single year during 2020-21. More than 5 times electrification was achieved during (2014-21) the last seven years as compared to 2007-14.
To boost rail infrastructure and make the Indian Railways network future-ready, Indian Railways has identified 56 projects across the country in various zones to be completed by Feb-Mar 2021 and FY22.
100 PM-GatiShakti Cargo Terminals for multimodal logistics facilities will be developed over the next three years.
2,000 km of the network will be brought under Kavach, the indigenous technology for safety and capacity augmentation.
In October 2021, India and Nepal signed an MoU (Memorandum of Understanding), for a proposed US$ 3.15 billion railway line project, to connect Kathmandu and the Indian border town, Raxaul.

BEST RAILWAY STOCKS

Let’s have a look at some of the best Railway stocks in India, which are fundamentally stable, and possess extreme growth potential given the current policies of the government to invest in Capital Expenditure and to nourish growth.

1. Ramkrishna Forgings Ltd.

Ramkrishna Forgings Ltd is an India-based company. The company is engaged in the manufacture of screw couplings draw gear assembly snubber assembly hanger block hanger side frame key and various other forgings items of railway coaches and wagon.

They manufacture and supply of open and closed plain carbon and low alloy steel forgings in the as- Forged Heat Treated and Machined condition for Railways Automobile and General Engineering Purposes.
The company’s products include forgings for railway coaches wagons and locomotives; forgings for automobiles mining and general engineering; forgings for valve bodies; transmission items; track links master links and trade rollers;
drop forgings from 1 kilogram to 125 kilograms and forged and fabricated spares for railway wagons coaches diesel and steam locos such as hanger screw coupling side frame key shackle stone guide etc.

2. JUPITER WAGONS

Jupiter Wagons Limited manufactures railway components. The Company produces rail transportation equipment such as fabricated bogies, couplers, draft gear, and wagons, as well as exports other steel castings. Jupiter Wagons serves customers worldwide.

The company’s business comprises manufacturing vehicle bodies for commercial vehicles, refurbishment of railway wagons, and manufacture of components for railway wagons, coaches, and locomotives. The company operates in five factories, of which four of their factories are located in the state of Madhya Pradesh and the fifth is located in the state of Jharkhand.

The Company announced its plans to enter the electric mobility market with the launch of ‘Jupiter Electric Mobility’ (JEM) focusing on commercial EV vehicles.
JEM also announced the formation of a joint venture with EA GreenPower Private Limited, a wholly owned subsidiary of GreenPower Motor Company Inc.
The joint venture will mark GreenPower Motor’s entry into India, focus on ECVs for India and other markets and launch products in the passenger transit and cargo market in the next 2 years.
It also intends to shift its manufacturing hub to India from China and export from there to the global markets.

3. TEXMACO RAIL & ENGINEERING LTD.

Texmaco Rail & Engineering Ltd is one of India’s leading freight car manufacturers and diversified engineering companies

.The company is the largest supplier of wagons to the Indian Railways in India with strong in-house capabilities for the design and manufacture of special purpose wagons for core sectors such as cement coal alumina steel container freight cars oil chemicals fertilizers thermal power projects and defense sector among others.
They also manufacture sugar mill machinery industrial boilers cryogenic and pressure vessels chemical plant equipment and agro-machinery such as power tillers.
The company’s major operating divisions are the heavy engineering division consisting of wagon hydro-mechanical equipment and process equipment manufacturing facilities and the steel foundry division.
They have five manufacturing facilities in the outskirts of Kolkata in Agarpara Belgharia Sodepur and Panihati.