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Recovery underway; Valuation is full

RVNL delivered an improving Q1FY27, with consolidated revenue of INR 43.2bn (+10.6% YoY) and EBITDA margin recovering to 4.41% from a depressed 1.7% in Q1FY26. Order book stood at INR 934.9bn as on 30 June 2026 (~4.4x TTM consolidated revenue), with Q1 inflow of INR 54.2bn against a full-year target of INR 200–250bn. Importantly, ~INR 400bn of order book is under active execution, with the balance awaiting approvals, land or financial closure. Management retained FY27 guidance of ~15% revenue growth and 15–20% PAT growth and guided to a 5-7% medium-term EBITDA margin with an ROE ambition of ~12–13%. Management's stated intent to move the book to a 50:50 nomination-bidding mix over three years structurally caps margins unless the higher-margin overseas pipeline (guided at 15–20%) converts meaningfully. We have factored 15% revenue CAGR over FY26-28E but stock trades at rich valuation of 41x FY28E EPS. We maintain SELL with a unchanged SOTP-based target price of INR 165/share.

Improving Q1FY27:

RVNL posted consolidated revenue of INR 43.2bn (+10.6% YoY) with EBITDA of INR 1.9bn and margin at 4.41% versus 1.66% YoY. PAT rose 18.7% YoY to INR 1.6bn (EPS INR 0.76), despite other income declining 38% YoY to INR 1.4bn and the effective tax rate rising to 28.6% (+610bps YoY). Finance costs eased 12% YoY to INR 979mn. Subsidiaries contributed INR 1.3bn of revenue and INR 127mn of PAT, while share of profit from JVs/associates stood at INR 62mn and dividend income from group entities at INR 121mn.

Order book moderates:

Order book stood at INR 934.9bn as on 30 June 2026 (~4.4x TTM consolidated revenue), down from INR 993bn at end-FY26, with Q1 inflow of INR 54.2bn against a full-year target of INR 200–250bn - implying a demanding ramp over the next three quarters. Segment-wise, railways dominate at INR 580bn, followed by S&P at INR 120bn, metros INR 57bn, power & transmission INR 40bn, ports/roads/highways INR 36.5bn and hydro/irrigation INR 16.3bn. Only ~INR 400bn is under active execution, with the balance awaiting approvals, land or financial closure.

International push and project execution:

Overseas expansion is the key margin lever, with priority geographies across Central Asia, the Middle East, Eastern Europe and South-east Asia. Bids have been submitted for transmission lines, rail and road projects in Africa and hydropower in Nepal, alongside an EoI for the Tel Aviv metro and identified opportunities in Georgia and Serbia. On domestic marquee projects, BharatNet (INR 130bn, 82,000 km of OFC) extends by a further 6-8 months on ground-level issues though hardware costs are locked at pre-crisis rates; the INR 14.4bn Vande Bharat Sleeper prototype rolls out in December 2026 with 120 sets over five years plus 35-year maintenance; and Rishikesh-Karnaprayag (INR 370bn) is 78% complete, targeted for December 2029.

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