Disclaimer – Analysis is NOT a BUY/SELL/HOLD Recommendation. It can be used for educational purposes. There can be lot of things which have been missed in analysis either due to lack of information or oversight etc.. Do your own diligence & contact your expert financial adviser before making any investment decision.

Oriental Rail Infra

Key Investment thesis –> Providing Infra to Railway sector. Govt focus and orders landing up fast to Railway vendors. Oriental rail Infra is prime contender for seats and birth for new coaches. Apart from that New wagons orders also flowing

Read Pick1, Pick2, Pick3, Pick4, Pick5, Pick6, Pick7, Pick8, Pick9, Pick10, Pick11, Pick12, Pick13, Pick14, Pick15, Pick16, Pick17, Pick18, Pick19

Business

Oriental Rail Infrastructure Limited (ORIL) (formerly know as Oriental Veneer Products Limited) is engaged in manufacturing and supply of rail products predominantly for Indian Railways(IR). It manufactures Seats and Berths, Chairs, Lavatory doors etc. for all types of passenger coaches. It also manufactures Heavy Engineering equipment’s like Railway Rolling Stock, a diverse range of products which includes Wagons, Bogie, Coupler & Draft Gears through its wholly owned subsidiary Oriental Foundry Private Limited (OFPL).

Manufacturing Facility for Silicon Foam, Seats and Berth, Rexine, Compreg Board, PU Foam used for Seats & Berths, Recron used for Seats & Berths

Only Listed player in Seats & Berths in Organised sector

RDSO Certified and preferred vendor

1000+ employee strength

This Wagon capacity has been increased to 2400 wagons in Sep2023

Preferential shares allotment and warrants issued at 169 Rs (approx 200cr raised)

Order Book and strength

Company has a strong order book of more than 1200cr

Strong promoter background

3 decade old company

Big clients

Fundamental Ratios, Cash, EBITDA, PAT

Sales and profit 7x and 10x approximately in last 9 years

ROCE and ROE >12 %

Debt to equity is okayish at ~1, Pledging is 0%

Promoter has good skin in game at ~55% shareholding and big players entered recently including Mukul Agarwal

Triggers

Macro Trends :

Amid rising demand for coal freight and an aggressive push towards diversifying its freight basket, IR is planning to buy 1,00,000 more Wagons over the next three financial years
Under the National Rail Plan(NRP), Centre wants to significantly increase the national transporter’s freight numbers, along with its modal freight share to 45 per cent by 2030. As per GOI estimates, consolidated demand for freight will be over 6,300 Million Tons (MT) by 2026 and 8,220 MT by 2031
Having ferried 1,418 MT in this fiscal, the national transporter would need to account for over 3,600 MT in 2031 to meet its NRP targets.

Company has worked on

Backward integration, Capacity Expansion, High Value Products and Client Diversification

Technicals

Technical chart in 10th Aug24

Risks

Working capital intensive nature of operations

Operating Cash flows are not good. Working capital days, Cash conversion cycle, ROCE, ROE needs to improve

Strong dependency on big customer IR

Margins are fluctuating in past based on execution and delivery. Not easy to predict bad or good quarters for company business

Susceptibility of profitability to volatility in raw material prices – ORIL’s product mix mainly includes seats, berths, compreg boards wherein the major raw materials are wood, rexene, cloth, foams, recron and various other solvents. Major raw material is supplied inhouse like company manufactures rexene and foam useful in manufacturing of seats. Other raw material consumed for manufacturing of seats includes veneer, which is formed from timber and company procures timber from local market. Its profitability is susceptible to fluctuations in the prices of wood as it serves as the main raw material for manufacturing of veneers, particle boards, plywood and compreg boards. For wagons, bogies and coupler body, major raw material is steel or scrap of steel which is procured from local market whose prices are highly volatile in nature. However, the company has a price variation clause inbuilt for key raw material, i.e., steel and wheels if procured from Indian Railways, thus reducing the price volatility to that extant

Disclaimer – Analysis is NOT a BUY/SELL/HOLD Recommendation. It can be used for educational purposes. There can be lot of things which have been missed in analysis either due to lack of information or oversight etc.. Do your own diligence & contact your expert financial adviser before making any investment decision.

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