Railway stock: Jefferies in a note on Wednesday cut its target price on Jupiter Wagons Ltd to Rs 185 from Rs 210 earlier, while retaining its 'Underperform' rating, after the wagon maker's June quarter Ebitda came in 32 per cent below its estimate, hurt by weak wheelset sales and margins.

While Jupiter Wagons is seen as key beneficiary of Indian Railways' indigenisation initiatives on wheel manufacturing and components, its Odisha wheel manufacturing plant is expected to be operational only by end-FY28, and component manufacturing joint ventures (JVs) are still seen in the nascent stages.

"We cut FY27E-29E EPS by 6-20 per cent to reflect Jun-26 quarter miss. Our Rs 185 PT (from Rs 210) values JWL’s core business at 24 times Sep’28E EPS (against March 2028E earlier) and 28 times for Titagarh to reflect 23 per cent FY26-30E EPS CAGR for JWL vs 44 per cent for Titagarh," Jefferies said.

The foreign brokerage valued Jupiter Wagons' wheel manufacturing JV at 3.5 times book value of investment. A strong pickup in JV profits and an uptick in wagon orders are key upside risks, Jefferies said.

Jefferies said weak-growth Wagon segment may account for 60 per cent-plus of sales even by FY28. New Wheel Manufacturing plant is the key catalyst which is expected to commission only by FY28E-end. It Estimated 23 per cent earnings per share (EPS) growth for Jupiter Wagons over FY26-30E, compounded annually. However, the stock trades at 43 times estimated September 2027 EPS, similar to Titagarh despite 44 per cent FY26-30E EPS CAGR for Titagarh, Jefferies said.

Jefferies said Jupiter Wagons' standalone Ebitda misses its estimates by 12 per cent. For the June quarter Wagons sales rose 38 per cent YoY on a low base, partly offset by 9 per cent YoY rise in realisations.

Jupiter Wagons has Rs 3,000 crore worth wagon order book (7,000 wagons), which was 1.4 times FY26 sales. A total of 80 per cent of the wagons are from private sector and, the management on the call indicated that the order book included new wagon designs.

"Design/Prototype approval for the new wagons led to slower execution. Gross margins declined 700 bps YoY on a high base that includes specialised wagons. Visibility on new wagon 1 lakh Wagon tender remains low, which is key given 68 per cent of estimated FY28 Ebitda is from wagon sales," Jefferies said.