47.5% Dividend, 2.56% Yield: Navratna Railway Stock Turned Ex-Dividend On February 9; BUY, SELL, OR HOLD?

Navratna railway stock, RITES traded volatile on February 9 as its share price turned ex-dividend for an interim dividend payout of 47.5%. This will be RITES' third interim dividend payout for the current fiscal. RITES share erased its Rs 800 mark in the opening bell and slipped by at least 1.4%.

RITES Share Price:

RITES share price traded at Rs 795.15 apiece, down by 0.8% on BSE with a market cap of Rs 19,140.05 crore at the time of writing.

At the opening bell, the stock price touched an intraday high and low of Rs 803.50 and Rs 790 apiece respectively.

Despite the latest fall, RITES is still a multi-bagger with gains of 153.5% from its 52-week low of Rs 311.60 apiece. Recently, RITES touched a 52-week high of Rs 821.30 apiece.

RITES Dividend:

The company has declared the third interim dividend of Rs 4.75 per share amounting to Rs 114 crore. The record date for payment of dividends is February 9, 2024. Currently, it has a dividend yield of 2.56%.

Earlier, the company paid dividends up to 45% amounting to Rs 4.5 per share for FY24. In the previous fiscal, the company's dividend payout was 205% amounting to Rs 20.5 per share.

RITES Results:

RITES operating revenue (consolidated), excluding other income, stands at ₹683 crore in Q3FY24 as against ₹677 crore in Q3FY23, up by 0.8%. Total revenue is ₹700 crore as against ₹703 crore in Q3FY23. EBITDA and PAT stand at ₹171 crore and ₹129 crore with margins of 25.0% and 18.4%, respectively.

Also, the company has secured more than 100 orders (including the extension of works) worth more than ₹612 crores in Q3FY24, thereby achieving the target of being one order a day company. The quarter ended with a healthy order book of ₹5496 crore.

RITES Outlook:

Here's what brokerages say about RITES after its Q3 earnings report:

Axis Securities:

Higher Capex outlay in the Interim budget 2024-25 for Railways and Highways has provided the company with large opportunities to grow its business verticals. The company has a robust order book position with a clean balance sheet, high return ratios, and a healthy dividend payout. We expect the company to post Revenues/EBITDA/APAT growth of 24%/23%/24%CAGR respectively over FY24-26E.

We maintain our HOLD recommendation on the stock as the recent sharp appreciation in the stock price leaves us with no upside. We await for a better entry point. The stock is currently trading at 28x/ 23x FY25E/FY26E EPS. We value the company at 23x FY26 EPS to arrive at a TP of Rs685 /share.

IDBI Capital:

Post the result we have retained our HOLD rating on the stock with revised TP of Rs683 (earlier Rs424). We have rolled forward TP to FY26E earlier it was FY25E and value the company at exit PER multiple of 25x. We will turn the buyer on the stock once margin in consultancy get stabilised. Order book at Rs55bn is equal to 2x FY24E revenue and nomination order has been falling and is at 1:1 to competitive order book. Stock catalyst is receipt of export orders & stabilization in consultancy margin.

Elara Capital:

We raise our EPS by 10% for FY24E, 4% for FY25E and 8% for FY26E amid export recovery. We increased our TP by 39% to INR 515 from INR 370 on 16x ([from 13x; three-year average one-year forward) December 2025E P/E, as we roll forward. We reiterate margin compression in consultancy and an outperformance of 44% vs the Nifty in the past three months. We expect an earnings CAGR of 15% during FY23-26E with a ROE and ROCE of 23% and 24%, respectively, during FY24-26E as the WC cycle may remain low despite the rise in turnkey construction along with a strong dividend yield of ~2.3% for FY24E.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.