Release Date: May 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- RITES Ltd (BOM:541556, Financial) secured two significant export orders worth INR 1,200 crores from Mozambique and Bangladesh, marking a return to export orders after four years.
- The company successfully diversified its Quality Assurance (QA) business, reducing dependency on Indian Railways (IR) from two-thirds to about 50% non-IR clients.
- Project consultancy revenue saw a substantial 10% year-on-year increase, reaching an all-time high of INR 1,300 crores.
- RITES Ltd (BOM:541556) maintained a trend of being a one-order-a-day company, securing 100+ orders totaling INR 940 crores in Q4.
- The company achieved a significant milestone by completing 50 years and attaining Navratna Status, indicating strong and sustained growth.
Negative Points
- Margins in the QA and consultancy business are under pressure due to increased competition and the shift from nomination to competitive bidding.
- Export orders, while significant, have tighter margins due to global tender competition, making it challenging to maintain historical margin levels.
- The company faces execution challenges with the new export orders, particularly with the longer production cycles for locomotives.
- Turnkey projects have lower margins, ranging from 3% to 4%, which could impact overall profitability.
- The leasing business, despite growth opportunities, is facing increased competition, potentially affecting future margins.
Q & A Highlights
Highlights from RITES Ltd (BOM:541556) Q4 and FY24 Earnings Call
Q: Can we take the improved margins this quarter as a benchmark for future guidance?
A: Yes, we aim to maintain both EBITDA and PAT margins at current levels, despite the tougher competitive environment. We are targeting appreciable growth in absolute EBITDA and PAT moving forward. - Rahul Mithal, Chairman and Managing Director
Q: Can you provide clarity on the export orders received and their impact on the order book?
A: We received INR300 crores from Mozambique, included in the March 31 order book, and INR915 crores from Bangladesh, which will be added in April. Work has already started, and we aim to realize revenue by the latter part of this year. - Rahul Mithal, Chairman and Managing Director
Q: How is the export order book looking, and what are the revenue expectations for FY25?
A: We have secured significant orders from Mozambique and Bangladesh. We aim to start revenue realization from these orders by Q3 or Q4 of FY25. We are also bidding for more global tenders and expect continued growth in international consultancy. - Rahul Mithal, Chairman and Managing Director
Q: What is the status of the Zimbabwe order announced last year?
A: The Zimbabwe order is progressing, with funding arrangements moving forward. We are hopeful it will mature into a formal LOA in the coming months. - Rahul Mithal, Chairman and Managing Director
Q: What is the guidance for top-line growth for this year and next year?
A: We are confident of appreciable growth in EBITDA and profit for FY24-25. While specific top-line growth numbers are not provided, we aim for substantial growth in EBITDA and PAT. - Rahul Mithal, Chairman and Managing Director
Q: What is the executable timeline for the turnkey projects worth INR2,500 crores?
A: Turnkey projects typically take about 2.5 to 3 years to execute. We aim to complete these within this timeframe. - Rahul Mithal, Chairman and Managing Director
Q: How do you see the leasing business growing, and what are the margin expectations?
A: The leasing business has significant growth potential, with increasing demand from various sectors. While margins may be tougher to maintain due to competition, we aim for higher revenues and EBITDA. - Rahul Mithal, Chairman and Managing Director
Q: What is the current order book, and what is its breakup?
A: As of March 31, the order book is INR5,700 crores, with INR2,600 crores in consultancy, INR2,500 crores in turnkey projects, INR300 crores in export, and the balance in leasing and subsidiary orders. The Bangladesh order of INR900 crores will be added in April. - Rahul Mithal, Chairman and Managing Director
Q: What is the competition landscape for RITES Ltd, both domestically and internationally?
A: RITES Ltd is unique in offering comprehensive infrastructure consultancy across multiple sectors. While each vertical has different competitors, no single player matches our breadth of services. - Rahul Mithal, Chairman and Managing Director
Q: What are the expectations for consultancy order book growth in the next few years?
A: While consultancy orders are typically smaller in ticket size, we aim to increase the number of orders and execute them faster for higher revenue realization. The focus is on maintaining a healthy order book and achieving substantial growth in consultancy revenue. - Rahul Mithal, Chairman and Managing Director
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
