Stock in Action – IRCON International Ltd

Movement of Day

Analysis

1. Based on technical analysis, the stock exhibits bullish momentum, supported by its recent price performance and volume analysis. 
2. Moving averages indicate an upward trend, with the 5-day SMA crossing above the 10-day SMA.
3. Pivot levels suggest potential resistance at R1 (215.78) and support at S1 (181.53). 
4. The Fibonacci levels align with the classic pivot levels, indicating strong confluence. 
5. Price performance shows a significant uptrend over the past year (294.57%), with recent consolidation reflected in the 1-week performance (-9.02%). 
6. The stock's high beta (1.90) indicates higher volatility relative to the market. 
7. Overall, technical indicators suggest a bullish bias in the stock's movement, with potential resistance levels to watch at R1 - 215.78 and R2 - 237.32, while maintaining support at S1 - 181.53 and S2 - 168.82.

Probable Rationale Behind IRCON stock Surge

Ircon International, prominent player in turnkey construction sector focusing on railway & highway projects, has witnessed significant surge in its stock performance, driven by several key factors.

Strong Financial Performance

In Q3 FY24, Ircon reported impressive financial results, with 22.91% YoY increase in revenue, reaching ₹ 2,884.22 crore. EBITDA witnessed substantial rise of 29.04% to ₹ 213.37 crore, resulting in margin improvement of 35 basis points at 7.39%. 

Net profit also showed significant uptick, recording growth of 28.78% at ₹ 244.7 crore. These robust financial figures indicate company's resilience & growth potential.

Dividend Announcement

Ircon recently received its Navratna status & announced interim dividend of Rs. 1.80 per equity share for financial year 2023-24. This gesture reflects company's commitment to rewarding shareholders & instils investor confidence.

Robust Order Book

Geography wise

As of December 31, 2023, Ircon's total order book stood at substantial ₹ 29,436.1 crore, providing revenue visibility & indicating healthy pipeline of projects in railway & highway segments.

Market Sentiment & Outlook

Railway stocks, including Ircon, have been rallying ahead of 2024 Budget, indicating positive market sentiment & expectations of increased government spending on infrastructure. Ircon's strong financial performance, diversified project portfolio, & robust order book position it well to capitalize on upcoming opportunities in sector.

Ircon has proven track record of executing projects both domestically & internationally, with over 128 projects completed globally. Company's focus on expanding its order book & bidding for new projects reflects its growth-oriented strategy & long-term viability in infrastructure development space.

IRCON’s Q3-FY24 Conference call takeaways

1. Order Book Composition

IRCON's order book in Q3FY24 stood at ₹ 294 billion. Notably, 45% of orders were secured through nomination, while remaining 55% were competitive bids. Majority of orders (91%) originate from domestic markets, with only 9% from international markets. Railways account for 72% of orders, followed by roads at 21%, with remainder from other sectors.

2. Order Inflow Challenges & Expectations

IRCON faced challenges in order inflow, with only ₹ 5 billion received in 9MFY24. Competition in small projects led to many instances where IRCON secured lower positions (L2, L3). Delays in large projects also contributed to subdued inflow. However, IRCON anticipates uptick in order inflow from Q2FY25 onwards.

3. Bidding & Project Execution Plans

IRCON bid for ₹ 50 billion worth of projects in Q3FY24 & plans to bid for additional ₹ 30 billion in 4QFY24. By 9MFY24, bids for projects totalling ₹ 150 billion were already submitted, awaiting results. company aims to double its yearly turnovers within 4-5 years, focusing on railway & roads & highways projects.

4. Revenue Expectations & Growth Drivers

As per some experts, revenue for FY24 is projected at ₹ 11.5 billion, with similar growth expected for FY25. Conclusion of EPC work in certain areas & geopolitical tensions impacting projects in Myanmar may affect revenue guidance, subject to changes in order wins.

5. High-Speed Rail Projects & Future Opportunities

IRCON is actively involved in High-Speed Rail Projects & anticipates more opportunities in this sector with upcoming projects & announcement of High-Speed RRTS corridors. Currently, two high-speed projects are at DPR stage, with tenders expected to be floated soon.

6. Investments & Solar Project Progress

IRCON has invested ₹ 23 billion in JV's & subsidiaries to date & plans to invest additional ₹ 10 billion over next two years, with ₹ 2.5 billion already invested this year. Company's solar project is progressing well, with land acquisition at 70% completion & necessary raw materials procured. Project completion is expected by Q2/Q3FY25.

Conclusion

Overall, surge in Ircon's stock can be attributed to its strong financial performance, dividend announcement, robust order book, positive market sentiment, & long-term growth potential in infrastructure sector.