RITES Ltd., a prominent infrastructure engineering services firm and subsidiary of Indian Railways, expects to achieve an all-time high growth trajectory in fiscal year 2027. Management forecasts FY27 sales to exceed the prior peak of Rs 2,660 crore, up from Rs 2,400 crore in FY26, driven by its order book nearing peak revenue potential.
Elara Capital's Outlook and Price Target
Despite lowering its price target for RITES shares to Rs 285 from Rs 310, Elara Capital has maintained its 'Buy' recommendation. The brokerage firm projects a potential 39% upside from the previous closing price of Rs 204.40. Elara's revised target is based on 25 times its March FY28E P/E, with a slight reduction in FY27E and FY28E EPS estimates due to a portion of the turnkey order book commencing execution later in FY27 or early FY28.
Elara's confidence stems from RITES' robust order book, strong order inflows, increasing exports, and an attractive dividend yield of 3.4% projected for FY28E. The firm anticipates an earnings compound annual growth rate (CAGR) of 18% between FY26 and FY29E, alongside average Return on Equity (ROE) and Return on Capital Employed (ROCE) of 20% each for FY27-FY29E.
Operational Performance and Order Book
RITES' management expects double-digit sequential growth in Turnkey sales for Q1 and healthy growth throughout FY27, with a strong ramp-up anticipated in FY28. Export activities are also projected to be robust, while leasing and consultancy verticals are set to continue their steady growth. The company's order book expanded by 2% quarter-on-quarter to Rs 9,300 crore, even amidst higher sales in Q4.
However, overall order inflows saw a 32% year-on-year decline to Rs 960 crore, primarily due to a high base from significant turnkey contracts won in the previous year. Segment-wise, export order inflows surged by 278% year-on-year to Rs 185 crore, and leasing inflows increased by 295% year-on-year to Rs 87 crore. Conversely, consultancy inflows decreased by 24% year-on-year to Rs 390 crore, and turnkey inflows dropped by 65% year-on-year due to the higher base effect, reaching Rs 290 crore.
RITES is optimistic about continued order inflow momentum and aims to secure its first international consultancy order for REMCL within the current year.
Stock Performance and Technicals
Currently, RITES shares are trading below their 5-day, 10-day, 20-day, 30-day, 50-day, 100-day, 150-day, and 200-day moving averages. The stock has seen a 35.17% decline from its 52-week high of Rs 316.15. With a one-year beta of 1.28, RITES shares exhibit high volatility. The Relative Strength Index (RSI) stands at 39.6, indicating the stock is neither in the overbought nor oversold zone.
Company Profile
RITES Limited provides a comprehensive range of engineering services. Its offerings include transport infrastructure consultancy, railway inspection, rolling stock leasing and maintenance, airport construction management, industrial and electrical engineering, and other related services.