Why This Analyst Thinks Rites Q1 Earnings Might Be Derailed

Railway engineering firm RITES is expected to clock in a lower profit and revenue in the first quarter of FY25.

What Happened: Axis Securities released its earnings preview for the first quarter of FY25 for the roads and infrastructure sector. The brokerage delivered a bearish forecast for RITES' key financial metrics for the period.

The firm's revenue is expected to decline 17% to ₹533 crore from last quarter when its revenue stood at ₹643 crore. This marks a 2% decrease on a year-on-year basis. Gross profit is expected to go down by 6% from last quarter from ₹349 crore to ₹329 crore, the brokerage firm added.

It further expects a 17% decline in the firm's EBITDA on a quarterly basis due to lower export sales. The company's profit after tax (PAT) will likely stand at ₹100 crore down 21% from last quarter's ₹126 crore.  The hit to PAT is attributed to lower sales and tighter margins.

Financial MetricQ1 FY25 Estimates Q4 FY24 Quarter-over-Quarter Change (%)Q1 FY24 Year-over-Year Change (%)
Revenues533643-17%544-2%
EBITDA146176-17%161-9%
EBITDA Margin (%)27.5%27.4%10bps29.6%(-210bps)
PAT (Profit After Tax)100126-21%108-7%
All figures in ₹ crore.

In the past month, RITES has bagged major contracts from several firms. Earlier this month, the Karnataka Mining Environment Restoration Corporation accepted the firm’s tender for the construction of the railway private freight terminals. 

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In June, RITES signed three different MoUs with the Damodar Valley Corporation, Eastern Railway's Andal Diesel Shed and the Delhi Metro Rail Corporation.

Sectoral Outlook: Axis Securtiies' top picks in the sector were PNC Infratech, HG Infra Engineering and J Kumar Infraprojects

PNC Infratech's revenue is expected to grow moderately after it was impacted by the election, labour shortage and extreme heat conditions, the analyst said in the note. Revenue will likely see a 17% decline on a quarterly basis but a 5% year-on-year rise is on the cards. 

HG Infra Engineering will also see its revenue grow moderately as per the brokerage firm. It is expected to record a 10% annual rise. J Kumar Infraprojects' top line is expected to grow 14% annually as execution improves, the brokerage added.

Price Action: RITES was trading 1.49% higher at ₹774.10, shares of PNC Infratech were up 1.66% at ₹489.50, HG Infra Engineering was down 1.96% at ₹1,695 and J Kumar Infraprojects' shares declined 2.41% at ₹881.50 during Monday afternoon. 

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Posted In: Analyst ColorEarningsEquitiesNewsMarketsAnalyst RatingsAxis SecuritiesDMRCHG InfraJ Kumar InfraprojectsPNC InfratechRites

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