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IDBI Capital Report
RITES Ltd.'s Q2 FY25 profit after tax was 19% below consensus estimates. Ebitda margin declined to 19.6% from 21.8% QoQ, with margins impacted by a slowdown in execution during the monsoon and a dip in quality assurance segment margins due to increased competition. Following the results, we have retained our "Hold rating on the stock with a target price of Rs 326.
We will turn bullish on the stock once margins in Exports and Consultancy stabilize. As RITES highlighted, the consultancy segment is still seeing an increase in the contribution from non-IR projects within quality assurance. The company is working to strengthen its International quality assurance segment and is venturing into countries like the UAE, Saudi Arabia, Oman, and Qatar for opportunities.
The order book, at Rs 66 billion, is equivalent to 2.5 times FY25E revenue, with competitive orders now accounting for 63% of the total order book. The key stock catalysts are order inflow and the stabilization of consultancy margins.
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