Pick of the Week : Buy RITES Limited for the Target Rs. 271 - Axis Securities Ltd
Investment Rational
A. Strong Order Book
• In Q2FY26, the company secured over 150 new orders worth Rs 851 Cr, taking the total order book to Rs 9,090 Cr and ensuring strong revenue visibility for the next 2– 2.5 years.
• Notably, 34% of the order book comprises the high-margin consultancy segment, underscoring its profitability profile. Backed by a robust pipeline and increasing opportunities across the infrastructure space, the company remains well-positioned to deliver sustainable long-term growth.
B. Export Vertical to Support Revenue Growth
• The company has secured export orders worth Rs 1,541 Cr, with revenue contribution from exports improving since Q2FY26.
• Given this momentum, the company’s revenue is expected to register a CAGR of 23% over FY25–FY27E.
C. Turnkey Projects to Contribute to Sales Growth from Q4FY26
• Turnkey projects account for 46% of the company’s order book and are expected to be a key driver of revenue growth.
• Although turnkey sales have currently seen a decline as most projects are in the initial stages, execution progress and transition to advanced stages are likely to accelerate revenue momentum going forward.
Outlook & Valuation
• The company maintains a robust order book along with a clean balance sheet, strong return ratios, and a healthy dividend payout. With favourable opportunities across segments, particularly in high-margin consultancy projects, it is expected to deliver Revenue/EBITDA/PAT growth of 23%/24%/21% CAGR over FY25-27E.
• The stock is currently trading at 21x FY27E EPS
Analyst Insights
BUY with a target price of Rs 271/share, implying an upside of ~10% from the CMP.
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