Shares of Ircon International Ltd. are currently experiencing a bear grip, having already declined 21 percent year-to-date. This comes as PL Capital has issued a 'Hold' rating for the railway public sector undertaking (PSU), with a revised target price that indicates a potential downside from its current trading levels.
Subdued FY27 Outlook and Analyst Concerns
According to Vishal Periwal, Vice President and Research Associate for Institutional Research at PL Capital, Ircon reported a weak financial year 2026. The analyst noted that the company's recovery hinges significantly on improved execution and sustained order momentum moving forward. Ircon has provided guidance for a subdued performance in FY27, projecting revenues to remain broadly at FY26 levels. This outlook is supported by an existing order book of ₹25,000 crore, offering execution visibility for approximately 2.5 to 3 years.
Order inflows did see an uptick in FY26, which helped to stabilize the order book after a decline in the preceding three years. Despite intense competition and ongoing geopolitical uncertainties, Ircon's management highlighted that the company has bid for projects worth ₹48,000 crore across 107 bids and anticipates incremental order inflows over FY27-FY28.
March Quarter Performance and Revised Targets
For the March quarter, Ircon reported an 8 percent year-on-year decline in revenue, falling 4 percent below Periwal's estimates. This shortfall was attributed to execution and clearance delays. Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) also came in 12 percent below estimates, though the EBITDA margin stood at 4.4 percent, a slight increase from 4.3 percent year-on-year. Notably, Profit After Tax (PAT) surpassed PL Capital's estimates by 10 percent.
Ircon International declared a final dividend of Re 0.70 per share, bringing the total dividend for the year to Rs 1.9 per share. This translates to a dividend payout of 29 percent and a dividend yield of 1.3 percent.
PL Capital Lowers Target Price
“Factoring in the softer execution outlook, we reduce FY27/FY28 EPS estimates by 1 percent/4 percent and revise our target price to Rs 136/share (from Rs 143), while maintaining a HOLD rating,” Periwal stated. The new target suggests a 3.78 percent downside from Ircon's Tuesday trading price of Rs 141.35 apiece.
The primary catalyst for a potential re-rating of Ircon shares remains sustained order inflows. The company is expected to benefit from an improving railway award environment, with sanctioned railway projects increasing to ₹1.5 lakh crore in FY26, marking a significant 110 percent year-on-year rise.
Order Book Composition
Ircon's order book is composed of 54 percent competitively bid projects and 46 percent nomination-based projects, with a strong 92 percent domestic exposure. Segment-wise, railways contribute the largest share at 78 percent of the total order book, followed by Highways at 16 percent, and other segments accounting for 6 percent.