Comments
IDBI Capital
RITES (Buy)
Target: ₹343
CMP: ₹264.70
RITES Ltd Q4-FY21 PAT at ₹140 crore is 14 per cent lower than our and consensus estimate, as revenue was impacted from covid disruption (supply chain issue). Consolidated EBITDA margin remained healthy at 29 per cent (up 50 bps y-o-y) and was driven by export orders and cost management (employee strength reduced by 9 per cent y-o-y).
In FY21, RITES received orders of ₹2,100 crore and order inflow could be strongly higher in FY22 as company is already L1 in order of ₹1,400 crore. Balance sheet continues to remain lean, CF was strong with OCF at ₹500 crore vs ₹300 crore in FY20.
Company has increased dividend payout to 72 per cent in FY21 vs 65 per cent in FY20. RITES stock performance has been muted in the last 12 months due to concerns on the execution.
FY22 execution is expected to pick up driven by commencement of export order and domestic consultancy as railway capex is at ₹2 lakh crore+. Stock trades at 8x FY23E EPS (below historically avg. of 10x). Maintain Buy on unchanged target price of ₹343 (valued at 12x PER). Stock offers dividend yield of 7-8 per cent.
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