1:1 Bonus Issue: Zero Debt Navratna PSU Turned Ex-Date For 3rd Interim Dividend Of 19%; Should You Buy?

The zero-debt company, RITES with a Navratna PSU status has turned ex-date for its dividend payout of 19% for FY25. RITES shared ended last week's performance with gains of nearly 1% despite reporting a decline in the Q3 financial book. Year-to-date, the stock has corrected sharply by 14%. RITES overall FY25 is seen to be weak due to a decline in revenue and margins, however, the brokerage is optimistic about improvement in FY26. Hence, Antique Stock Broking has suggested HOLD on RITES stock.

RITES Share Price:

During the Budget day, on February 1, RITES shares turned ex-dividend. On the ex-date, the stock closed at Rs 254.70 apiece, down by 2.43% on BSE with a market cap of Rs 12,240.98 crore. The stock's 52-week high and low is at Rs 413.08 apiece and Rs 243.35 apiece respectively.

RITES Q3 Results:

The PSU player recorded operating revenue (consolidated), excluding other income, at Rs 576 crore in Q3FY25 as against Rs 683 crore in Q3FY24, registering a dip of 15.7%. Meanwhile, total revenue is Rs 614 crore, which was lower from Rs 700 crore in Q3FY24.

Also, EBITDA and PAT stood at Rs 123 crore and Rs 109 crore with margins of 21.3% and 17.8%, respectively. Year-on-year, there is a decrease in revenue which is attributed to lesser revenue from quality assurance, a downtick in turnkey and no exports.

Further, RITES secured over 110 orders (including extension of works) worth more than Rs 1933 crore in Q3FY25, thereby achieving the highest-ever order book of Rs 7978 crore as of December 31st, 2024.

Giving outlook ahead, Rahul Mithal, Chairman and Managing Director, RITES said, "Securing orders of more than ₹1900 crore in just one quarter, which is nearly equal to the orders received in the entire FY24, underscores our strategy to aggressively march ahead, leveraging our multisectoral strength and maintaining our USP of being a
'1 order a day' company."

RITES Dividend:

RITES has announced a third interim dividend of Rs 1.90 per share or 19% for the financial year 2024-25. For this, the company turned ex-dividend on February 1, 2025, and only those investors will be eligible who are holding RITES shares in their demat account by the end of Saturday.

Earlier, RITES paid up to Rs 1.75 per share dividend and its ex-date was on November 14, 2024. Before this, RITES delivered a bonus issue of a 1:1 ratio along with a Rs 5 per share dividend with an ex-date on September 20, 2024.

RITES Recommendation:

In Antique Stock Broking's view, "RITES revenue declined by 16% YoY and is 12%/ 17% below our/ consensus estimates. Segment-wise, turnkey segment revenue declined more than expected. EBITDA declined by 31% YoY as the EBITDA margin was lower at 20.4% vs. 24.7% in 3QFY24 and 19.6% in 2QFY25. But importantly, on a QoQ basis, consultancy segment margin is stable. Post the result, we have cut our EPS estimates by 8%-10% over FY25-27E to factor in the weak numbers and compression in the export margin."

Furthermore, Antique's note said, "On revised estimates, the stock trades at 26x FY27E EPS and we retain HOLD rating with a revised TP of INR 243 (earlier INR 325, valued at 30x), valuing the company at 25x FY27E EPS. The company announced a dividend of INR 1.9 per share, till date DPS is INR 4.9 (FY24 at INR 9). Given that we expect PAT to decline in FY25, we expect a DPS of INR 6.7 (div. yield of ~3%). The order book has increased QoQ to INR 80 bn (3.5x TTM revenue) with inflow of INR 20 bn in 3QFY25, with 65% inflow in the turnkey segment and the remaining in consultancy and others."

Lastly, it added, FY25E is expected to be weak on revenue and margin. But execution should improve from FY26E as export revenue commence. Catalyst for the stock is execution uptick in export and incremental order inflow (RITE is eying INR 6.5 bn orders from Zimbabwe).

About RITES:

RITES Limited, a Navratna and Schedule 'A' Central Public Sector Enterprise under the Ministry of Railways, incorporated on April 26, 1974, is a multidisciplinary engineering and consultancy organization, providing a comprehensive range of services from concept to commissioning in all facets of transport infrastructure and related technologies. The company's market capitalization has placed it among the top 500 listed companies in India, a testament to the high-quality solutions and services it delivers, driven by its talented pool of professionals.