Why RITES Share Price is Rising

India's PSU stocks saw a significant rally in the first half of this calendar year. However, even these behemoths couldn't escape the recent stock market sell-off.

Some recovery was seen in the past two trading sessions, but many PSU stocks are trading at multi-month lows.

Defence PSUs, in particular, have been hit hard, now trading at levels not seen in the last six months. This shows how deep the correction has been in these stocks, even though broader market indices reached record highs.

RITES, a public sector company, is no exception to this sell-off.

Known for providing infrastructure consultancy services, especially in transport and engineering, RITES plays a key role in railway projects and urban planning. The company's steady performance over the years, combined with its diversification into new sectors, has made it a trusted player in infrastructure development.

Despite its strong reputation and a big order book the company's stock price fell by 4.4% in the past six months.

However, today i.e. 9 October 2024, RITES share price rallied over 9% following an important announcement. Let's find out what's driving the recent rally in RITES share price and whether it's placed for more gains.

Strategic Partnership with Etihad Rail

RITES share price rallied today after announcing a strategic partnership with Etihad Rail. This partnership, formalised through a Memorandum of Understanding (MoU), allows RITES to explore and contribute to the development of railway infrastructure in the UAE.

The collaboration also aims to enhance rail services across the region by focusing on innovation, advanced IT solutions, and improved logistics. The MoU is set to boost the efficiency of rail corridors, modernise train operations, and enhance passenger and freight management.

The MoU opens new revenue opportunities for RITES. The partnership positions RITES to supply rolling stock, provide consultancy services, and manage large-scale infrastructure projects. These capabilities make the company an essential player in the UAE's growing rail sector.

The MoU has also bolstered RITES' global strategy. The company's 'RITES Videsh' initiative focuses on expanding its international presence, and this agreement marks a significant step in that direction.

This MoU is driving the stock price higher because partnerships like these boost investor confidence. It signals that the company is entering new markets, diversifying revenue streams, and leveraging its expertise to secure long-term growth.

What Next?

RITES is currently navigating challenges that have impacted its share price. The company has faced significant setbacks in its inspection and export businesses, leading to a notable decline in revenue.

The loss of high-margin streams, particularly in exports, has resulted in lower earnings. However, the order book has increased by 11%, with a promising addition of approximately Rs 130 billion (bn) in new orders across various sectors.

Looking ahead, RITES plans to focus on executing these new orders effectively. The company aims to leverage its diverse portfolio to tap into both government and private capital expenditure. It intends to maintain flexibility in its strategy, allowing it to adapt to shifts in demand from either sector.

The future strategy includes enhancing margins by optimising project execution and controlling costs. The management expects to achieve stable blended margins in the range of 20% to 40% over time.

However, the management has guided that the competitive nature of recent export orders may result in lower margins compared to historical figures.

RITES is also committed to exploring international opportunities, particularly in high-growth markets. This aligns with its goal to expand its global footprint while diversifying its revenue sources. By pursuing innovative solutions and advanced technologies, RITES aims to improve efficiency and service delivery.

In summary, while the current challenges have affected RITES' share price, the company is strategically positioned for recovery. By focusing on execution, diversifying its client base, and exploring international markets, RITES seeks to achieve sustained growth in the coming years.

How RITES Share Price has Performed Recently

In the past five days, RITES share price is down by 1.8%. In the last month, it is down 4.2%.

In 2024, so far its share price has surged 28.1% and it has rallied 37.1% in the last one year.

The stock touched its 52-week high of Rs 413.1 on 27 February 2024 and a 52-week low of Rs 216.3 on 26 October 2023.

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.

RITES vs Engineers India

Happy Investing

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