RITES Limited – I

As with Avanti Feeds and Rajesh Exports I picked RITES Limited from the screen of low debt, high growth companies with low P/E ratio.

Numbers and Narratives

RITES Limited is an engineering consultancy company specialising in transport infrastructure. It earns its revenues primarily through consulting and turnkey projects. A majority of its customers are government and public sector companies and I expect it to continue that trend as the rail infrastructure in our country develops. It is a mature company that has been growing above the industry average over the last 5 years. I expect them to revert to industry average growth over the next 5 years and the margins to decrease over the next 10 years due to increased competition.

The core numbers that I arrive at based on the story are

  • Compounded revenue growth for next 5 years = 15% (15% industry average)
  • EBIT margin in year 10 = 25% (~32% historical)
  • Initial cost of capital = 7.89%


I’ve used the above numbers along with the financial information to compute my DCF valuation for RITES Limited as seen below.

As you can see, the valuation price came out to ₹437.80, about 83% higher than the last traded price of ₹238.35.



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