Key takeaways of the call

Gross order inflow in Q2FY20 was Rs 507 crore up from Rs 473 crore in Q1FY20. The order book as end of Sep 30, 2019 thus stood at Rs 5833 crore (Rs 6052 crore as end of Jun 30, 2019) and of which turnkey orders were Rs 2369 crore, consultancy was RS 2474 crore, exports Rs 860 crore and Leasing Rs 130 crore. Current order book gives revenue visibility for next 2.5 years.

The standalone operating revenue (excluding other income) MOU target of the company for FY20 will be Rs 2300 crore (a growth of 16.8% over FY19 revenue) with a minimum operating profit margin of 23.2% for FY20. The company is confident of achieving or even surpassing it.

RITES has reported its highest ever quarterly and half yearly performance driven by growth in exports, turnkey works and leasing, besides consultancy continue to be the key segment.

Strong 70% growth in operating revenue in Q2FY20 was due to multifold increase in exports over the Q2FY19.

Spurt in Other Income is due to one-time receipt of Rs 91 crore from final settlement of old dues from a client.

Consultancy revenue is lower in Q2FY20 largely due to prolonged monsoon affecting project management consultancy fee and some projects not reaching their billing stages.

Leasing and Turnkey have continued its growth & achieved new peaks during Q2FY20. To continue the growth momentum the company is planning to acquire 10 more locomotives to take the total locomotives for leasing operations to 70 numbers very soon.

Exports have shown substantial increase in Q2FY20 due to continued exports of DEMUs and Locomotives to Sri Lanka. The company is developing prototype for passenger coaches for exports for various gauges apart from meter/broad gauges markets.

Focus of the company on exports has been productive and are seeing steady upward momentum from clients.

Demonstration of good mix of growth and profitability in H1FY20 is an indicator that the company is on track to achieve its performance guidance for FY20

Of the cash balance the company have commitment aggregating Rs 1026 crore. About Rs 100 crore towards capex for locomotives; Rs 200 crore for building (excluding workshop for locomotive maintenance) in various cities.

The company expects to close the current fiscal with an order book of Rs 8000 crore with the company expect fresh order inflow from Exports, turnkey projects and consultancy.

The earlier guided that the export billing for current fiscal will be about Rs 460-500 crore. In H1FY20 the company has billed exports of around Rs 400 crore and expects billing of another Rs 100-110 crore in H2FY20. Another SL order worth Rs 600 crore part of the OB will be finished in FY21. The company has qualified as single eligible bidders for an order in Africa for which the company is yet to submit bids. The company is not only looking at traditional markets of meter gauge and broad gauge, it is developing prototypes of other gauges.

About 20-22 countries in Africa uses 1.26 meter which is slightly close to our meter gauge.

Net Order inflow of Rs 2000-3000 crore is targeted in H2FY20. Exports about USD 70-90 million, turnkey orders (including limited orders from RB amongst railway PSUs) of about Rs 1200-1500 crore and consultancy of about RS 400-500 crore. Railway Board is considering some projects for distribution among railway PSUs and IR Inhouse and the total value of orders on limited tendering is expected to be in the range of about Rs 30000 crore.

Major projects billing are not evenly spread and linked to their own milestone crossing. So overall the company expects 10% growth for consultancy on annual basis.

Turnkey margin will be in the range of 3.5%.