Railway Stocks To Buy: Jefferies bullish on Titagarh, cautious on Jupiter Wagons — Here’s why

Railway Stocks To Buy: India’s railway stocks are back in focus after global brokerage Jefferies initiated coverage on the sector with a positive long-term outlook but a clear stock preference. The brokerage expects 10 per cent CAGR in rolling stock capex between FY26 and FY30, driven by modernisation and rising demand. However, it has taken a divergent stance on Titagarh Rail Systems and Jupiter Wagons, favouring Titagarh for its stronger earnings growth while flagging Jupiter Wagons over valuation concerns.

Jefferies believes the investment cycle in Indian Railways is entering a steady growth phase, with rolling stock capex expected to grow at 10 per cent CAGR from FY26 to FY30.

However, growth is not uniform across segments:

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• Passenger & metro coaches: 9-16 per cent CAGR
• Wagons: 5 per cent CAGR

The brokerage estimates cargo growth at around 6 per cent annually, which is significantly below Indian Railways’ 16 per cent target, and this is likely to keep wagon demand relatively subdued.

Modernisation push to drive passenger, metro demand

A key theme highlighted by Jefferies is the government’s continued focus on railway modernisation.

• Higher investments in passenger coaches
• Strong expansion in metro rail projects
• Policy push supporting domestic manufacturing

This shift is important because passenger and metro segments typically offer better margins and faster growth, compared to wagon-led businesses.

Why Jefferies prefers Titagarh Rail Systems

Jefferies has initiated coverage on Titagarh with a ‘Buy’ rating, backed by strong earnings visibility and favourable segment exposure.

• 43 per cent EPS CAGR expected between FY26-30
• Increasing focus on passenger and metro coaches
• Strong order book and execution track record

The brokerage believes Titagarh is well positioned to benefit from the ongoing shift towards passenger-centric investments, which could drive both revenue growth and margin expansion.

Target and upside:

• CMP: Rs 639.35
• Target price: Rs 810
• Potential upside: 26.7 per cent

Titagarh Rail Systems stock performance

Shares of Titagarh Rail Systems Limited ended higher on April 6, closing at Rs 639.35, up Rs 24.45 or 3.98 per cent from the previous close of Rs 614.90.

Why Jupiter Wagons gets ‘Underperform’ tag?

In contrast, Jefferies has rated Jupiter Wagons as ‘Underperform’, mainly due to its business mix and valuation.

• 23 per cent EPS CAGR expected between FY26-30
• Heavily dependent on wagon segment
• Limited exposure to high-growth passenger segment

The brokerage highlights that despite lower growth, the stock trades at around 40x FY27E PE, which it considers expensive.

Target and downside:

• CMP: Rs 258.22
• Target price: Rs 200
• Downside: 22.5 per cent

Same valuation, different growth outlook

One of the most important takeaways from the report is that both companies are trading at similar valuations:

• Around 40x FY27E PE for both stocks

Yet, their earnings growth outlook differs sharply:

• Titagarh: 43 per cent EPS CAGR
• Jupiter Wagons: 23 per cent EPS CAGR

This gap in growth is the key reason why Jefferies prefers Titagarh over Jupiter Wagons.

Jupiter Wagons stock performance

Shares of Jupiter Wagons Limited also ended in the green on April 6, closing at Rs 258.22, up Rs 1.61 or 0.63 per cent.

What it means for investors?

Jefferies’ report signals that while the railway sector remains a strong long-term theme, stock selection will be critical.

• Companies linked to passenger and metro growth may outperform
• Wagon-focused businesses could see relatively slower growth
• High valuations make risk-reward more selective