Synopsis:
Railtel Corporation of India is in focus as ICICI Securities projects a further downside of 31 percent, citing weak revenue from revenue services.
With a market capitalization of Rs 11,650 crores, the shares of Railtel Corporation of India Ltd are currently trading at Rs 363 per share, representing a 30 percent decline from its 52-week high of Rs 516.50 per share. In the last one year, the stock has corrected by 27 percent.
Leading brokerage house ICICI Securities has initiated a sell call on the stock with a target price of Rs 255 per share, signalling a further downside of 31 percent from its previous day closing price of Rs 367.55 per share.
Railtel’s Q1FY26 results were impacted by a poor performance in its telecom services segment, which grew by only 2.1 percent year-over-year, significantly below the expected 9–10 percent growth range.
This sluggish growth can be attributed to increasing competition, particularly in RailWire. As a result, EPS estimates for FY26–27 have been trimmed by 6 percent, and the target price has been adjusted down to Rs 255 from Rs 270, even though the P/E ratio for FY27E remains at 20x, as stated by ICICI Securities.
On a brighter note, overall revenue saw a 33 percent year-over-year increase, but this growth was mainly driven by lower-margin projects, which limits the profit potential. Net profit only edged up by 2.8 percent year-over-year, reaching Rs 63.5 crore.
On the upside, the order book surged by 50 percent year-over-year to Rs 7,200 Crore, fueled by both railway and non-railway projects. Railtel is also looking forward to long-term opportunities like Kavach (with an order book of Rs 5 billion) and edge data centers, although significant revenue from these ventures is not expected until FY27 and beyond.
Financial Highlights
The company reported a revenue of Rs 744 crore in Q1 FY26, up by 33 percent from its Q1 FY25 revenue of Rs 558 crore. Coming to its profitability, the company reported a net profit growth of 35 percent to Rs 66 crore in Q1 FY26 as compared to Rs 49 crore in Q1 FY25.
The stock delivered an impressive ROE and ROCE of 16.46 percent and 21.84 percent, respectively, and is currently trading at a P/E of 37.37x as compared to its industry average of 28.46x.
RailTel Corporation of India Ltd is a broadband, telecom, and IT services provider throughout India and internationally. Services include, but are not limited to, RailWire broadband, application servers, data centers, cloud server, VPN, cybersecurity, tower colocation, and Aadhaar services. It also provides execution of projects like station Wi-Fi, optical fiber networks, and video surveillance, for government, corporates, banks, and other institutions.
Written by Satyajeet Mukherjee
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