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After a strong run over the past few years, railway stocks have entered a period of correction, with valuations cooling and execution concerns weighing on sentiment.

Yet the broader story remains intact.

The Union Budget 2026-27 has announced a record ₹2.93 trillion (tn) allocation toward railways, focused on capacity expansion, modernisation, and network upgrades.

This creates a steady pipeline of orders across segments, from rolling stock to EPC and signalling.

In this backdrop, we examine five beaten-down railway stocks.

#1 Texmaco Rail & Engineering

Texmaco Rail, an Adventz group company, is a leading player in the Indian railway manufacturing. It’s the largest wagon supplier to Indian Railways with a production capacity of 12,000 to 15,000 wagons.

It designs and manufactures a diverse range of freight rolling stock for the government, the private sector, and export markets.

Also, Texmaco is one of India’s largest exporters of foundry goods. The management is expanding this division, aiming to increase export volumes from 5,000 metric tons (MT) to 20,000 MT.

As of 31 December 2025, Texmaco's order book stood at a robust ₹5,660 crore.

The company is in the midst of a strategic reset under ‘Texmaco 2.0’, a roadmap that seeks to double its scale while lifting Ebitda margins. The initiative is designed to reduce the inherent cyclicality of the freight wagon business by diversifying revenue streams and building a more stable earnings profile.

To this end, it plans to enter into the manufacturing of urban mobility solutions, including metro and EMU passenger coaches. Moreover, it aims to manufacture propulsion systems and the Kavach system.

Texmaco is also establishing a global capability centre (GCC) to provide design services worldwide.

To strengthen its technical capabilities, it has partnered with the German company 'Hormann' and is working towards finalizing a joint venture (JV) with RVNL.

It is actively shifting its product mix to include a higher proportion of private and export wagons. There is surging private-sector demand from the steel, cement, and automotive industries.

To capitalize on this opportunity, Texmaco is restructuring its leasing business and has pioneered the development of two multimodal wagons: freight multipurpose (FMP) and container multipurpose (CMP). The FMP wagon has started generating revenue, and the CMP is expected to see heavy market demand.

Texmaco also plans to enter non-rail sectors such as iron pellet manufacturing and mining.

From a financial perspective, revenue declined 4% year-on-year (YoY) to ₹1,040 crore in Q3 FY26, driven by lower wagon deliveries. Operating profit was flat while net profit declined by 17%.

Titagarh is the only Indian company that manufactures both freight wagons and passenger coaches. It is a dominant player in the freight segment, with 25% market share in wagon manufacturing in India.

It has an annual manufacturing capacity of 12,000 wagons. Titagarh also designs and manufactures metro coaches and has an annual manufacturing capacity of 300 coaches.

The company is also involved in the design, manufacturing, and comprehensive 35-year maintenance of the Vande Bharat Sleeper trains through a JV.

The passenger segment is a rapidly growing part of its business and currently makes up the majority (77%) of its order book.

The passenger rail system (PRS) segment is expected to be the dominant part of its business within the next two years, driven by an existing order book of over ₹10,790 crore and additional JV orders.

The company expects a jump in execution, with a target to reach a production rate of 20 metro cars per month in the coming months.

Titagarh is also preparing to complete the car bodies for its first 16-car Vande Bharat train by the end of FY26, with the first fully assembled train likely ready in Q3 of FY27.

Currently, the PRS segment operates at an 11-12% margin. However, the company aims to increase this to approximately 15% over the next few years through economies of scale and backward integration.

To this end, it plans to manufacture its own propulsion systems and components (such as traction motors and converters) through technology transfers from ABB. This could improve profitability.

Titagarh is also executing a capex of roughly ₹1000 crore for the PRS segment. This capex is expected to be completed in the first half of FY27.

Wagon production was temporarily affected by a mismatch and a shortage of wheelsets. The company expects the issue to be resolved soon. It has started importing wheels for private wagons, and trial production at its JV with Ramkrishna Forgings is likely to begin by March-April 2026.

The segment's long-term outlook remains strong, driven by Indian Railways' target to carry 3 bn tons of freight by 2030, with a 40% share in national logistics. This necessitates a continuous supply of wagons.

Having recently secured a wagon leasing license, the company can now lease wagons to private clients. Through this initiative, the company is entering the lucrative wagon maintenance market.

Its shipbuilding business also holds a strong position with an order book of ₹5 bn. Its long-term strategy is to aggressively build and scale the business and list separately.

From a financial perspective, revenue declined 5.6% YoY to ₹830 crore in Q3 FY26, due to low wagon deliveries amid wheelset shortages. Operating profit declined 10% to ₹0.8 bn, while margin stayed flat at 10%. Net profit declined by 31%.

Railways constitute the core business of this Navratna central public sector enterprise, accounting for 75% of its current order book, followed by the roads and highways construction sector (18%), and other infrastructure projects (7%).

Ircon has a robust order book of ₹23800 crore as of 31 December 2025. It secured over ₹4000 crore in new orders during H1 FY26 and is targeting a similar amount for H2.

The company plans to bid aggressively to secure new orders amid intense competition. However, the margin here remains quite low, offset by a higher margin on exports.

Beyond railways and highways, it’s nevertheless exploring new areas such as 'kavach' and hydroelectric projects to diversify.

On the financial front, consolidated revenue fell 19% YoY to ₹2,120 crore in Q3 FY26, primarily due to slower project execution cycles, which typically accelerate in H2. Operating profit increased 19.6% to ₹160 crore, while margin expanded to 7%. Net profit increased 16% to ₹100 crore.

Ircon expects to end FY26 with revenues of ₹10,000-11,000 crore, and targets similar revenue in FY27. It expects to benefit from the estimated ₹35.3 tn capex that Indian Railways is expected to undertake on capacity expansion and modernisation by 2032.

Ramkrishna Forgings (RKFL) manufactures forged and cast components. It has historically supplied core railway components such as frames and bolsters. RKFL also provides highly margin-complete, fully locked-in bogie assemblies to Indian Railways, helping the railways achieve cost reductions.

The railways passenger segment generates an annual demand of over ₹2000 crore for these assemblies. Of this, RKFL is currently qualified to capture up to 60% of these orders.

RKFL has a JV (51:49) with Titagarh Rail. This consortium has received a 'Letter of Award' to manufacture and supply forged wheels for Indian Railways.

The JV is setting up Asia's second-largest forged-wheel manufacturing plant in Chennai at a cost of ₹20 bn. The plant will have an annual production capacity of 228,000 forged wheels.

The trial production is expected to begin by March 2026. This trial phase involves submitting 300 wheels to the government for approval before bulk production begins.

In FY27, the JV is committed to supplying 40,000 wheels to the domestic market. Once production exceeds 100,000 wheels in FY28, RKFL plans to export high-speed rail wheels globally.

To further consolidate its position and increase wallet share per train, RKFL also aims to pursue strategic acquisitions in the railway space.

From a financial perspective, revenue increased 2% YoY to ₹1100 crore in Q3 FY26, driven by domestic and international markets. Operating profit increased 29% to ₹160 crore, while margin expanded to 15%. Net profit fell 33.3% to ₹14 crore due to higher taxes, depreciation, and interest.

Railway sector contribution to RKFL's domestic revenue mix has increased significantly, rising from 4.6% in FY25 to 7.3% in 9M FY26. This contribution is expected to go up from FY27 onwards.

In 9M FY26 alone, RKFL secured new railway orders worth ₹120 crore and ₹200 crore railway casting orders. Management anticipates that, driven by this robust order inflow and the execution of bogie assembly work, the railway business will witness double-digit sales growth over the next two years.

Overall, management anticipates top-line growth of 10-15% for FY27, and projects a similar CAGR over the next three years. Margin is also expected to recover to the historical range of 19-20%.

It has secured ₹9040 crore in new orders over the last three years, providing multi-year revenue visibility. Execution of these contracts is forecast to ramp up sequentially, from ₹1310 crore in FY26, to ₹2250 crore in FY27, and to ₹2790 crore by FY29.

RVNL's core business is developing, upgrading, and modernizing railways.

It’s gradually diversifying into telecommunications, electrical distribution, roads and highways and metros and ports. Vande Bharat trains represent a long-term tailwind for the company.

RVNL plans to manufacture 120 Vande Bharat sleeper train sets in partnership with a Russian company, each comprising 16 coaches. The first prototype is expected to be ready by June or July 2026.

It also expects the BharatNet telecommunications project to start generating a healthy revenue. Top-line growth for FY26 is expected to be relatively flat at around ₹10,000 crore. The company anticipates a dip in its bottom line for FY26.

However, the management targets a sustainable topline and bottomline growth of about 10% per annum starting FY27.

Over the next three years, RVNL expects a balanced revenue stream. About 50% is expected to come from ₹40000 crore in nomination-based railway works, and the remaining 50% from bidding projects, including Vande Bharat, BharatNet, highways, and other segments.

The company has a very strong current order book of almost ₹87000 crore, providing revenue visibility of around four years, based on FY25 revenue of ₹19,900 crore.

On the financial front, revenue grew 2.5% YoY to ₹4680 crore. Operating profit declined 7.5% to ₹220 crore, while margin stayed flat at 5%. Net profit was 3.8% higher at ₹320 crore.

Taken together, the correction across these stocks reflects a mix of execution delays and normalisation after a sharp rally, rather than a structural slowdown in the sector.

With a strong policy push, rising order pipelines, and diversification into new segments, the railway ecosystem continues to evolve.

The real test from here is not order inflow, but how efficiently these companies convert visibility into margins and cash flows.

Meanwhile, it's important to analyse these companies' fundamentals, including financial performance, corporate governance practices, and growth strategies in detail.

Happy investing.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.

This article is syndicated from Equitymaster.com

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