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Axis Securities Suggests Buy Miniratna Mid Cap PSU Stock For Higher Returns, Target Price Rs 405
Axis Securities has assigned buy call to miniratna mid cap stock, RITES Ltd with a target price of Rs 405 apiece. RITES has a strong order book of Rs 5950 Cr and is well diversified with high-margin Consultancy contributing ~41%, Turnkey projects ~49%, Exports ~5%, and the rest from Leasing. If you buy RITES Ltd shares, it has the potential to surge 10%.
1. RITES Ltd Stock Performance & Return
The last trading price of the stock is Rs 381 apiece with an intraday surge of 3.54%. The stock's 52-week high is Rs 433 apiece and 52-week low is Rs 226 apiece, respectively. The mid cap stock has given 43% return in last 3-years, 40% in last 1-year, and 27% in last 3-months. In last 1-month, the shares have jumped 4%.
2. Increased Push On Infra Development
The government initiatives such as like Gati Shakti Master Plan, National Infrastructure Pipeline, Bharatmala, Expressways, National Rail Plan, High-speed trains, Sagarmala etc. to develop world class infrastructure in India are expected to benefit incumbent like RITES.
With higher Capex for Railways in Budget 2022, the company is eyeing new consultancy tenders from Metro and High-speed Rail Projects along with Railways. Being a leading player in the transport consultancy, RITES is expected to be a significant beneficiary of the Indian Railways' infrastructure push.
3. Robust Financials And High Dividend Payout
We derive adequate operational comfort from the company's strong financials (with net cash and cash equivalents of Rs 725 Cr as of 30th Sep'22), high ROE and ROCE, and a high dividend payout (70% in FY22). We expect the company's financial matrix to remain healthy from a medium to long-term perspective.
4. Valuations
According to Axis Securities, "We continue to like the company's execution capability and its order book position, clean balance sheet and high dividend payout and expect Revenues/EBITDA/APAT to grow at a CAGR of 18%/18%/14% respectively over FY21-24E. We value the company at 15x FY24 EPS of Rs.27. We recommend a BUY rating on the stock with a TP of Rs. 405/ share implying an upside of 10% from the CMP."
5. About RITES Ltd
RITES- a Miniratna (Schedule A) CPSE under the Ministry of Railways, is an engineering consultancy company. It is a leading multi-disciplinary engineering and consultancy organization specialized in the field of transport infrastructure providing diversified and comprehensive services from concept to commissioning. The company is a preferred consultancy organization for Government of India (GoI) including Indian Railways.
Disclaimer
The stock has been picked from the brokerage report of Axis Securities. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.
