RITES bags LoA from Tata Steel for loco hiring along with operation, maintenance; stock gains

On June 7, shares of RITES increased following the company's announcement of receiving a Letter of Award from Tata Steel Limited. This award pertains to the hiring, operation, and maintenance of locomotives. The contract is valued at ₹39.63 crore (excluding GST), as stated in the company's regulatory filing.

The order is scheduled for completion by April 20, 2027. It is worth mentioning that RITES recently disclosed a mixed financial performance for the quarter ending in March 2024. The company's revenue decreased by 6% year-on-year (YoY) to ₹643 crore, primarily due to weak results in the exports sector and reduced income in the quality assurance segment. This decline was, however, offset by growth in the other segments.

RITES reported an 8% year-on-year (YoY) decline in EBITDA, which fell to ₹176 crore, and a 1% YoY decrease in PAT, which dropped to ₹137 crore. The company's EBITDA margins stood at 27.4%, compared to 27.9% in the same period the previous year.

In the fiscal fourth quarter (QFY24), the PSU secured orders totaling ₹940 crore, averaging more than one order per day during the quarter. Analysts noted that RITES's overall order book remains robust at ₹5,690 crore, excluding ₹915 crore from export orders, ensuring revenue visibility for the next two years.

The consultancy segment constitutes 46% of RITES's order book, which is recognized as a high-margin business. Additionally, analysts at Axis Securities anticipate steady growth in the company's consultancy business, both domestically and internationally.

Higher capex outlay in the Interim budget 2024-25 for railways and highways has provided the RITES with large opportunities to grow its business verticals, noted Axis Securities.

The brokerage highlighted that RITES boasts a strong order book, a clean balance sheet, high return ratios, and a solid dividend payout. It also projected that RITES would achieve compound annual growth rates (CAGR) of 23% in Revenue, 23% in EBITDA, and 25% in PAT over the FY24-26E period.

"We believe that consistency in dividend payout will be maintained. This will also support protecting any major downside risk in the stock," Axis Securities said as it maintained 'Hold' recommendation on the stock with a target price of ₹715.

In the previous session, RITES shares closed 6.6% higher at ₹647.95 on the National Stock Exchange (NSE). Year to date, the stock has outperformed the benchmark Nifty 50, with an increase of nearly 29%. Over the past 12 months, the company has delivered returns of approximately 70%.

RITES Limited is an India-based engineering and consultancy company. The Company offers various services from concept to commissioning in transport infrastructure and related technologies. Its segments include Consultancy-Domestic, Consultancy-Abroad, Export Sale, Leasing-Domestic, Turnkey Construction Projects-Domestic and Power Generation.Its business engagements as consultants, engineers and project managers are in railways, highways, airports, ports, ropeways, urban transport and inland waterways in India and abroad.

It also provides services of third-party inspection, quality assurance, construction supervision and project management, operations and maintenance, leasing, export of rolling stock and modernization of railways workshop projects, doubling and electrification on turnkey basis. It provides its services in approximately 55 countries in Asia, Africa, Latin America, South America and Middle East regions. RITES (Afrika) (Pty) Limited and REMC Limited are its subsidiaries.