Stock recommendation: Titagarh Wagons
After surging 29% in 2017, The Indian Equity markets seem to be carrying forward the healthy run into 2018. Global Indices are trading near all time highs and although many express their concerns regarding the valuations, there are always quality companies with strong business models and fundamentals which will multiply your money.
As the Parliament prepares to start the Budget Session, we at Trading Sense present our first stock pick.
TITAGARH WAGONS LIMITED : TWL
Before we delve into the details of the rationale behind this pick and the exact trade setup here’s a little prologue.
The Company: Titagarh Wagons Limited (TWL) is one of the leading private sector wagon manufacturers in India. Incorporated in 1997–98, TWL is primarily engaged in the business of manufacturing Railway Wagons & EMUs (Coaches), Bailey Bridges, Heavy Earth Moving and Mining Equipment, Steel and SG iron castings of moderate to complex configuration etc.
The Stock: TWS has a market capitalization of ₹1943.63 Cr. and currently trades at a price of ₹174.35 in both BSE and NSE with a 52 Week High/Low of ₹189.7 and ₹ 97.3 respectively. It’s shares have been classified under the Infrastructure-General sector, which I guess is evident from the description mentioned above.
Why do we recommend it ?
The Parliaments Budget Session is expected to begin on 30th January and Finance Minister Arun Jaitley is likely to present India’s first post-goods and services tax (GST) and the BJP government’s last full Budget on 1st February 2018.
The nearly century old tradition of having a separate budget for the Indian Railways was scrapped and merged with the General Budget. No separate budget also means the Railways does not have to pay an annual dividend to the government.
The company, along with its subsidiaries, expects to win around 25 percent of the orders awarded by the Indian Railways as part of a tender to procure 9,500 wagons.
Such good news for the sector and positive sales expectation for the company’s core product are the main reasons why we expect the TWL stock to do well in the budget rally.
Moreover, TWL has recently been licensed to manufacture defense platform products, the promoter’s stake in the company has increased and the country’s largest private sector wagon maker’s September-end order book stands at Rs 1,500 crore, and will execute it in the next 12–14 months.
The company has also been maintaining a healthy dividend payout of 39.93%.
The Trade Setup
Selecting a good company is only half the ball game. Unless you don’t choose the correct entry and exit points, even the best of stocks can make you loose money.
We usually prefer technical indicators to generate these entry/exit signals as we believe they are the best at capturing short term momentum and reversion.
Fibonacci Retracement at the 38.82 % mark indicates a good entry point. Scrip is trading near its 20 day moving average and has corrected from its 52 Week high of ₹ 189.7.
A noticeable inverted hammer pattern on the weekly charts is indicating a bullish reversal.
Chaikin Money Flow is showing a bullish divergence and is in the positive territory which highlights the flow of smart money into the stock.
Final Call
Keeping in mind the above mentioned technical and fundamental factors, we’ve come up with the following trade setup:
Accumulate on dips in 160–165.
Target of ₹190 with a time frame of 2 months and ₹210 in a longer 4 month period with Stop Loss at ₹ 154.60.
One major request, don’t blindly copy this idea. Rather, try to properly understand the thought process behind the recommendation and validate our setup using your own rationale before investing. Keep Trading Sense!
