Here's why Jefferies sees 32% upside on one railway stock but 22% downside in another

Brokerage firm Jefferies has initiated coverage on railway stocks Titagarh Rail Ltd., with a "buy" rating, and on Jupiter Wagons with an "underperform" rating in its latest note on Monday, April 6.

For Titagarh Rail, Jefferies has a price target of ₹810, which implies a potential upside of 32% from last Thursday's close, while for Jupiter Wagons, it has a price target of ₹200, which implies a downside potential of 22% from current levels.

Rail Mobility Outlook

Jefferies expects India's rolling stock capex to grow at a Compounded Annual Growth Rate (CAGR) of 10% between financial year 2026-2030. This will be led by a 9% CAGR in passenger coaches and a 16% CAGR in metro coaches.

The brokerage expects wagons to grow at a 5% CAGR during this period as it expects cargo growth of only 6% compared to the Indian Railways' target of 16%.

Competitive intensity is low in the urban transit space, with only three active players, as technology and the mandatory 75% domestic procurement norms acting as entry barriers.

Titagarh Rail

Jefferies expects Titagarh to be a key beneficiary of the rising passenger and metro coach demand.

For the stock, Jefferies sees a 35% revenue CAGR and a 43% Earnings per Share (EPS) CAGR over financial year 2026-2030. This will be led by a 14x rise in its passenger segment revenue during the next five years, along with a strong order book, that lends visibility.

The brokerage also expects the passenger segment margin to improve by 1.4 percentage points as the company moves higher in the technology value chain.

For Titagarh, Jefferies expects its Return on Equity (RoE) to double from 6% in financial year 2026 to 13% by financial year 2028 and to 16% by financial year 2030, led by higher plant utilization.

Titagarh's core business is valued at 25 times March 2028 Earnings Per Share (EPS) and the upcoming wheel Joint venture at 2.5x the investment value, based on Jefferies' ₹810 price target.

"We believe that valuation multiples are justified relative to those of industrial companies with similar EPS growth," the Jefferies note said.

Limited wagon business visibility post exhaustion of the current order book, weak execution, and entry of Chinese players into passenger coaches segment are some key risks for the stock.

Jupiter Wagons

Jefferies prefers Titagarh Rail over Jupiter Wagons, as it estimates an EPS CAGR of only 23% for the latter, compared to 43% for Titagarh until financial year 2030.

The brokerage sees Jupiter Wagons' EPS growth to be slower than Titagarh, given the former's higher exposure to the wagons business.

"With valuations at 40 times its estimated price-to-earnings for financial year 2027, we find Jupiter too expensive for the growth differential versus Titagarh," Jefferies wrote in its note.

Jupiter Wagons is valued at 20 times its March 2028 EPS for the core business, and at 3.5 times price-to-book value for its wheel manufacturing JV.

A strong pick-up in JV profits or an uptick in wagon orders are key upside risks for the stock.

11 out of the 12 analysts that have coverage on Titagarh Rail have a "buy" rating on the stock, while the other one has a "hold" rating, while six analysts cover Jupiter Wagons, with two having a "buy" rating, three recommending a "hold", while one has a "sell" rating on the stock.

Shares of Titagarh Rail are trading 0.6% lower on Monday at ₹611.55. The stock is down sharply from its 52-week high of ₹974. On the other side, shares of Jupiter Wagons are down 1.3% on Monday at ₹253.1, having nearly halved from their recent 52-week high of ₹457.