Titagarh Rail (TITAGARH)

FairStock Score: 16/100 — RISKY

Score breakdown: P/E: 0/3 · ROCE: 1/2 · Growth: 0/2 · Dividend: 0/1

Key Financials

Strengths

• ROCE of 16.55% suggests decent operating capital efficiency despite low ROE
• Low debt-to-equity of 0.25 provides financial stability
• Promoter holding of 40.46% aligns management interests with minority shareholders
• Altman Z-score of 3.31 indicates the balance sheet is not under immediate distress
• Latest quarter still generated ₹832 Cr sales and ₹48 Cr net profit

Concerns

• Sales growth declined 10.80% and profit growth fell 29.14%, showing clear deterioration
• Free cash flow is deeply negative at ₹-676 Cr, raising questions about earnings quality
• Valuation is expensive: P/E 51.67, EV/EBITDA 70.46, and P/B 4.02, with price far above Graham Number of ₹244.41
• Low ROE of 7.32%, weak Piotroski F-Score of 4/9, and negligible dividend yield of 0.14% offer little protection

AI Analysis

Titagarh Rail is not the kind of business I want to own at this price. Let me start with the numbers. The company earns a return on equity of only 7.32%, well below what I would demand, and while ROCE is 16.55%, the negative sales growth of 10.80% and profit drop of 29.14% tell me the cycle is turning against it. Railway wagon making is a cyclical business; today's high demand can become tomorrow's idle capacity. The balance sheet is not broken—debt/equity is 0.25 and the Altman Z-score of 3.31 gives some comfort—but free cash flow is deeply negative at ₹-676 Cr. I cannot value a business on reported earnings when cash flow contradicts those earnings. At ₹741.80, the market cap is ₹9,440 Cr, 51.67 times earnings and 70.46 times EBITDA. That is a rich price for a company whose profit is falling. Graham's number comes to ₹244.41, giving zero margin of safety—in fact, a negative margin of safety of about 186.79%. The Piotroski F-Score of 4/9 confirms deteriorating fundamentals. Promoter holding is 40.46%, which is a positive, but the dividend yield of 0.14% is negligible. I prefer a wonderful business at a fair price; this is an average cyclical business at an unreasonably high price. The latest quarter's ₹832 Cr sales and ₹48 Cr net profit may look okay, but the trend is down. As Buffett says, it is far better to buy a wonderful company at a fair price than a fair company at a wonderful price. Titagarh, at this valuation, offers neither. I would wait for a much lower price, or clear evidence that the cycle has turned and cash generation has revived.

Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer