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In-line sales; likely pickup from H2

RITES (RITE IN) reported in-line sales growth, up 1.5% YoY, led by turnkey and leasing, which offset muted exports. This was led by a delay in dispatch of the first Bangladesh rake slipped by 10- 12 days into Q3 deferring ~INR 700mn of sales. Management reiterates FY27 target of double-digit revenue growth, with EBITDA and PAT margin of 20% and 15%, respectively. H2 is set to be driven by exports deliveries to Bangladesh and Mozambique, along with faster execution of a young turnkey orderbook. We reiterate Buy with a higher TP of INR 315 on 25x September 2028E P/E as RITE is set for growth acceleration, led by execution of high-value exports orders, and a robust orderbook.

Turnkey and leasing offsets export; exports to pick up from H2FY27:

Q2 sales grew 1.5% YoY to INR 5.6bn, led by robust growth in turnkey and leasing, which offset weakness in exports. Turnkey surged 66% YoY to INR 1.8bn, leasing rose 15% YoY to INR 0.5bn, while consultancy dipped 10% YoY to INR 2.2bn. Exports fell to INR 5mn in Q2FY27 from INR 0.6bn in Q2FY26. A delay in the first Bangladesh rake dispatch led to ~INR 700mn revenue deferment in Q3. At least two locos are likely to be supplied in Q4FY27 and the balance seven in FY28. For the Mozambique order of five locos worth ~INR 1.5bn, the first loco is targeted in Q4FY27, and the full order by H1FY28. RITE has been declared L1 on a Sri Lanka order of five sets of seven coaches each worth ~INR 4bn, with delivery due 12 months from the letter of awardance. Management sustains double-digit sales growth in FY27 along with exports and turnkey to step up in H2. RITE targets FY27 exports revenue of INR 3bn.

Inflows moderate; orderbook steady at INR 94bn:

Q2 order inflows were INR 4.5bn, down 48% YoY, with consultancy accounting for INR 3.8bn, and no export inflows. RITE secured 130+ orders during the quarter, ahead of its goal of one order per day. Orderbook stood at INR 93.9bn, with turnkey at 48%, consultancy at 29% and exports at 19%. About 63% of orderbook and 70% of fresh inflows are won via competitive bidding. RITE targets an FY27-end orderbook of INR 100bn.

Mix shift weighs on margin:

EBITDA margin contracted 170bp YoY to 21.9% in Q2 on mix shift toward turnkey. Segment-wise, EBIT margin for consultancy fell 30bp YoY at 38.1%, turnkey margin up 50bp YoY to 1.6%, and leasing margin surged 970bp YoY to 39.5% based on higher loco utilization. Exports EBIT slumped to a loss of INR 19mn vs a gain of INR 63mn in the base quarter, due to negligible revenue booked in Q2.

Reiterate Buy with a higher TP of INR 315:

We retain our EPS estimates during FY27-29. We reiterate Buy with a higher TP of INR 315 from INR 300 based on 25x (unchanged) September 2028E as we roll forward a quarter. We remain positive based on a robust orderbook and order inflows, spike in exports, and a high dividend yield of 3.6% in FY28E. We expect an earnings CAGR of 18% during FY26-29E, with an average ROE and ROCE of 20% each during FY27-29E.

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