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Axis Securities
RITES (Buy)
Target: ₹315
CMP: ₹286.1
RITES – a Miniratna (Schedule A) CPSE under Ministry of Railways, is a leading multi-disciplinary engineering and consultancy organisation specialised in the field of transport infrastructure providing diversified and comprehensive services. It is a preferred consultancy organisation for Government of India (GoI) including Indian Railways. RITES has a strong order book of ₹7,072 crore and is well-diversified with high-margin consultancy contributing nearly 36 per cent, turnkey projects about 42 per cent, exports around 19 per cent, and the rest from leasing. Furthermore, about 71 per cent of the order book is sourced from the GoI and its PSUs.
Over the past 4 years, the order book has delivered impressive growth of over 25 per cent CAGR, indicating its winning probability. The order book gives revenue visibility for the next 2-3 years.
With a 35 per cent rise in the capex for Railways in Budget 2021, the company is eyeing new consultancy tenders from metro and high-speed rail projects along with Railways. Its strong financials with net cash and cash equivalents of ₹3,363 crore as of March 2021 offers operational comfort. We expect the company’s financial metrix to remain healthy over medium to long-term perspective.
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