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RVNL, Ircon shares drop 7% after weak Q2 performance

Stocks
2 min Read Nov 8, 2024
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The share market investment landscape took a hit today as Ircon International Ltd. and Rail Vikas Nigam Ltd. (RVNL) shares experienced sharp declines following weaker-than-expected Q2 results. Both companies, state-run leaders in railway infrastructure, reported declines in their revenue and profits for the September quarter, with Ircon shares dropping by up to 7% during early morning trading.

Q2 performance: Revenue declines and narrowing margins

Ircon International Ltd's Q2 FY25 results showed an 18% quarter-on-quarter (QoQ) increase in net profit to ₹206 crore. Despite this growth, the profit remains down from ₹250.7 crore a year earlier. Ircon's revenue from operations also declined by 19.3%, falling to ₹2,447.5 crore from ₹2,987 crore in Q2 FY24. While Ircon's EBITDA dropped slightly from ₹216 crore to ₹201 crore, its margins expanded marginally to 8%, compared to 7% in the same period last year.

In comparison, RVNL reported a 27.24% year-on-year (YoY) drop in net profit to ₹286.88 crore and a 1.21% decline in revenue from operations to ₹4,854.95 crore. RVNL also saw a decline in its EBITDA to ₹256 crore, with its margin shrinking by 100 basis points to 5%.

These declines have led investors to reassess the value of these railway stocks, especially as share market investment sentiment remains cautious amidst underwhelming corporate performances.

Railway stocks face sustained selling pressure

Both Ircon International Ltd's and RVNL have been trading below recent highs due to sustained selling pressure. Ircon shares, which reached an all-time high of ₹351.60 in July, are now down by approximately 42%. This marks a consistent downward trend, with monthly declines of 10% in August, 12.7% in September, and 4.52% in October, followed by an additional 6.14% drop in November.

RVNL shares, too, have followed a similar pattern, with the stock falling 12.5% in September and another 11.25% in October. As of today, November has seen a further 4% drop, leaving RVNL 30% below its recent peak of ₹647 per share.

For investors focused on share market investment, these figures indicate a period of volatility and potential risk in railway stocks.

Key takeaways

  • Declining earnings impact: Both Ircon and RVNL have reported substantial declines in revenue and profits, leading to significant stock price drops.

  • Consistent downward trends: Ircon shares are now 42% below their peak, while RVNL is trading 30% below its recent high.

  • Cautious investor sentiment: With lower-than-expected Q2 results, share market investment in railway stocks is facing headwinds as investors reassess valuations.

This drop in railway stock performance serves as a reminder of the significance of thorough market analysis in share market investment.