RITES to log robust orders, execute high value exports orders: Elara amid price target cut

RITES share price: Shares of RITES Ltd are set for a 39% upside on expectations of all-time high growth in FY27. The miniratna company’s management expects FY27 to record growth acceleration with a target to cross its prior peak sales of Rs 2,660 crore in FY22 (FY26 sales of Rs 2400 crore) as most of its orderbook will near peak revenue potential. 

RITES stock with negative returns of up to 44% in two years can reach a target price of Rs 285, a 39% upside to the previous close of Rs 204.40, said Elara. Market cap of the firm stood stood at Rs 9847 crore on Thursday. 

The infra stock is down 35.17% from its 52 week high of Rs 316.15. RITES shares have a one-year beta of 1.28, indicating high volatility during the period. 

In terms of technicals, the relative strength index (RSI) of RITES stands at 39.6, signaling it’s trading neither in the overbought nor in the oversold zone. RITES shares are trading 5 day, 10 day, 20 day, 30 day, 50 day, 100 day, 150 day and 200 day moving averages.

According to the RITES management, Turnkey sales are set to rise in double-digit sequentially in Q1 and healthy growth in FY27, with strong ramp up in FY28. Exports are also seen to be robust. The other verticals of leasing and consultancy are expected to continue on their steady growth path. 

Orderbook of RITE’s grew 2% QoQ to Rs 9300 crore despite higher sales in Q4. Order inflows were lower 32% YoY to Rs 960 crore due to a larger base on various turnkey contracts won in the base quarter. 

Segment-wise, export order inflows spiked 278% YoY to Rs 185 crore, leasing inflows surged 295% YoY to Rs 87 crore, while consultancy inflows were down 24% YoY to Rs 390 crore, and turnkey declined 65% YoY on a higher base to Rs 290 crore. RITE expects order inflow momentum to continue, and is also targeting to win the first international consultancy order for REMCL this year.     

However, the brokerage has lowered its target price to Rs 285 from Rs 310 on 25 times (unchanged) March FY28E P/E. The brokerage lowered its FY27E and FY28E EPS estimates by 2% and 12% each as a sizeable portion of turnkey orderbook is new, which would see execution only from the latter part of FY27-early FY28. 

Elara reiterated its ‘Buy’ call on robust orderbook and order inflows, rise in exports, and a high dividend yield of 3.4% in FY28E. 

It expects an earnings CAGR of 18% in FY26-29E, with an average ROE and ROCE of 20% each in FY27-29E.

RITES Limited, a subsidiary of Indian Railways, provides engineering services. The company offers transport infrastructure consultancy, railway inspection, rolling stock leasing and maintenance, airport construction management, industrial and electrical engineering, and other related services.