Rail Vikas Nigam (RVNL IN) – Q4FY26 Result Update – Weak margins; valuation remains elevated – SELL

Rail Vikas Nigam (RVNL) reported a weak Q4FY26 performance, with modest revenue growth of 6% YoY offset by a sharp decline in profitability as EBITDA margin contracted to 4.0% (vs 6.0% YoY and 4.7% QoQ). As per RVNL, Margin pressure was driven by non-recurring factors: an onerous contract provision, JV reconciliation adjustments. Management expects underlying profitability to improve in FY27E versus the reported FY26 margin of 3.8% and has guided for revenue growth of 15–20% in FY27E. The order book remains robust at INR 993bn (~4.9x FY26 revenue), with a balanced ~50:50 mix of nomination and competitive projects, supporting medium-term execution visibility. While reported new order inflow was weak at INR 70bn, contract scope revisions increased effective inflows to INR 226bn in FY26. Although revenue guidance is ahead of our estimates, continued margin weakness (as competitive bid project share in order book continue to rise) and lower other income (led by lower cash amid higher receivable) have led us to cut FY27E/FY28E EPS estimates by 15%/5%. At the current market price, RVNL trades at an elevated ~47x FY28E EPS despite a modelled PAT CAGR of ~15% over FY26–28E. We maintain SELL with a revised SOTP-based target price of INR 165/share (vs INR 183 earlier). Key upside risks include a sustained recovery in EBITDA margins and consistent annual order inflows of ~INR 300bn.