Elara Securities remains bearish on RITES, sees over 21% downside; here's why
₹370, indicating a downside of over 21 percent. The stock has gained 23.5 percent in the last 1 year. It hit its record high of ₹584 on September 11, 2023, but has shed over 19 percent from its peak.
However, it has advanced over 54 percent from its 52-week low of ₹305.60, hit on December 26, 2022. 2023 has been a volatile year for the stock with it giving positive returns in 6 and negative in 5 of the 11 months so far. It rose the most in July, up 25 percent and lost the most in February, down 1.5 percent.
In the September quarter, the firm reported a 23.49 percent drop in its consolidated net profit to ₹101 crore as against ₹132 crore in the year-ago period. The company's revenue from operations also fell 11.68 percent to ₹582 crore in Q2 FY24 from ₹659 crore in the corresponding period last year. Let’s now understand, why the brokerage remains bearish on the stock.
Gets LOA on diesel locos but loses wagons order to competitor: RITES has received a Letter of Award (LOA) to supply 10 diesel locomotives worth $37.7 mn or ₹313 cr to CFM, Mozambique (Ports & Railways). The company is likely to procure diesel locomotives from the Integral Coach Factory (ICF). However, an order for 300 high-sided wagons was awarded to a competitor where RITE was earlier declared L1.
The estimated order size for wagons was ₹200 crore. Valuation: The brokerage had factored in inflows of ₹500 crore from Mozambique on RITE’s L1 positioning. Based on the recent announcement, it assumes a lower inflow; as a result, Elara kept revenue and earnings estimates unchanged in FY24E but reduced them by 2 percent each in FY25E and FY26E.
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