1:4 Bonus, Rs 5/Sh Dividend: Navratna Railway PSU Stock RITES; Axis Securities Says HOLD For Rs 715

Navratna railway PSU stock, RITES Ltd is recommended to hold after its Q4 results. Axis Securities raised its target on RITES due to the company's healthy order book, export verticle which is expected to support revenue growth, and healthy dividend payout. RITES is set to deliver up to Rs 5 dividend per share ahead. The stock is at Rs 698.15 apiece, with market cap of Rs 16,776.68 crore by end of May 2024.

YTD, RITES stock is up by 40% on BSE.

Axis Securities On RITES:

On the valuation, post Q4 results, Axis Securities said, "The management refrained from giving any revenue guidance but guided for substantial growth in EBITDA & PAT moving ahead. It also guided for more export orders moving ahead. Owing to higher competitive intensity, pressure on margin will persist."

Axis Sec's note added, "We maintain our HOLD recommendation on the stock. We await for better entry point." The brokerage raised its target price on RITES to Rs 715 from earlier Rs 685 per share.

The brokerage foresees sustainable growth in both the domestic and overseas consultancy business of the company. Further higher capital outlay in the interim budget 2024-25 for Railways will act as a growth catalyst for the company.

RITES Dividend:

As per Trendlyne data, RITES has delivered up to 21 dividends since September 2018.

The upcoming dividend payout is of Rs 5 per share or 50% on the face value of Rs 10 each for FY24. The announcement was made on May 28. RITES said, upon approval of shareholders, the dividend declared will be paid within thirty (30) days of declaration, subject to deduction of applicable Tax at Source as per the
provisions of the Income Tax Act, 1961 and rules framed thereunder.

Upon approval, the total Dividend Payout Ratio attributed for FY24 will stand at 95.2%.

On the current market price, RITES has a dividend yield of 2.6%.

RITES Bonus Issue:

Just before Covid's first wave of lockdown, RITES has distributed its first bonus share in the ratio of 1:4. The ex-date was on August 8, 2019.

RITES Earnings:

RITES operating revenue (consolidated), excluding other income, stands at ₹643 crore in Q4FY24 as against ₹687 crore in Q4FY23, a dip by 6.3%. Total revenue is ₹668 crore as against ₹706 crore in Q4FY23. EBITDA and PAT stand at ₹178 crore and ₹137 crore with margins of 27.7% and 20.5%, respectively.

Meanwhile, RITES operating revenue (consolidated), excluding other income, stands at ₹2453 crore in FY24 as against ₹2628 crore in FY23. Total revenue stands at ₹2539 crore as against ₹2730 crore in FY23. Year-on-year, there is a decrease in revenue on account of a significant dip in revenue from the Export segment and Quality Assurance business. EBITDA and PAT stand at ₹650 crore and ₹495 crore against ₹746 crore and ₹571 crore, respectively, in FY23. EBITDA and PAT margins at 26.5% and 19.6%, respectively, remained range-bound as the better-margin consultancy stream of revenue balanced out the low-margin turnkey revenue.

RITES Order Book:

The company has secured more than 100 orders (including extension of works) worth more than ₹940 crore in Q4FY24, thereby continuing to be a 'one-order-a-day' company. The quarter ended with a healthy order book of ₹5690 crore.

RITES Limited, a Navratna Public Sector Enterprise, is a leading player in the transport consultancy and engineering sector in India, having diversified services and geographical reach. The company has an experience spanning 50 years and undertaken projects in over 55 countries in Asia, Africa, Latin America, South America, and Middle East region.