Why RITES Share Price is Rising

Railways stocks are having their day in the sun again after a year-long run up.

The rally in railways-related stocks comes just weeks before the Interim Budget presentation. Investors expect allocation towards the railways to be high, and it will be watched keenly by the market.

Additionally, expectations of strong Q3 results have contributed to the upward momentum in these railway stocks.

Amid this rally, shares of RITES have also witnessed a jump. The company's share price is up 26% in the last five days. It also hit its 52-week high today.

Let's find out what is driving the share price...

Order Wins to Drive Revenue Growth

Shares of the company have been on the rise this month on the back of multiple order wins.

The stock touched its 52-week high today after the state-owned firm announced it received an order worth Rs 4.1 bn. The order relates to carry out various infrastructure works at IIT-Bhubaneswar. RITES will undertake the construction of various infrastructure works for the institute.

The company also recently signed a Memorandum of Understanding with North Eastern Electric Power Corporation.

RITES will support NEEPCO as a project management consultant for work related to rail infrastructure facilities, including signalling and telecommunication, overhead equipment, and conveyor systems at different hydropower stations in the region, including the Siang Basin.

Besides this, it signed a pact with CFM Mozambique for the supply of diesel locomotives and incidental services at a total cost of Rs 3.1 bn. The pact has been signed for the supply of ten diesel locomotives.

All these order wins provide healthy revenue visibility in the near term. RITES has a robust order book position of Rs 55 bn as of the September 2023 quarter.

The consultancy segment comprises 48% of the orderbook, which is a high-margin business.

What Next?

Going ahead, the company aspires for double-digit growth in the bottom line. It is seeing growth in its non-Indian Railway clients in the QA sector.

RITES is not planning to diversify into construction and will continue to focus on consultancy, with a new vertical in sustainability. The consultancy order book is at a total of Rs 27 bn, with growth in international revenue at about 50%.

With respect to the export business, RITES is aggressively targeting new countries with different gauges of railways for their export business, with a focus on cape gauge orders.

The revenue from export orders is expected to spill over to FY25. The company expects a steady basis revenue of about Rs 4-5 bn on an annual basis from export of rolling stock.

How RITES Share Price has Performed Recently

In the past month, shares of the company have gained 33%.

The stock has gained 36% in the past six months and around 101% in the year gone by.

The stock touched its 52-week high of Rs 693.65 on 25 January 2024 and a 52-week low of Rs 311.6 on 22 February 2023.

At the current price, the company trades at a price to earnings multiple of 28.8x and price to book multiple of 5.59x.

About RITES

RITES, formerly known as Rail India Technical and Economic Service Limited, is a Navaratna central public sector undertaking under India's Ministry of Railways.

It was incorporated in 1974 and is a multidisciplinary engineering and consultancy organisation providing a comprehensive range of services from concept to commissioning in all facets of transport infrastructure and related technologies.

The company is a leading player in the transport consultancy and engineering sector in India. It's uniquely placed in terms of diversification of services and geographical reach in various sectors such as railways, highways, urban engineering (metros) & sustainability, airports, ports, ropeways, institutional buildings, inland waterways, and renewable energy.

The company is the only export arm of the Indian Railways for providing rolling stock internationally (except for Thailand, Malaysia, and Indonesia).

For more details on the company, check out RITES financial factsheet and quarterly results.

You can also compare it with its peers.

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