Buy Engineers India; target of Rs 166: Prabhudas Lilladher

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Prabhudas Lilladher's research report on Engineers India

We roll forward to Sep-25E and upgrade our rating to ‘BUY’ from Accumulate (factoring in recent correction in stock price) with revised TP of Rs166 (Rs165 earlier) valuing it at a PE of 16x Sep-25E. Engineers India Ltd (EIL) reported flat revenue YoY with EBITDA margin expanding 668bps YoY to 12.2%, driven by higher gross margin. A liquidated damages settlement in one Turkey project added Rs449mn & Rs446mn to Q2 revenue and profit respectively. The company is increasing efforts in overseas business in order to bring it to a similar level as the domestic business, with a focus on markets such as Algeria, Nigeria, and South America. EIL is also concentrating on growing its new decarbonization business including green hydrogen, green ammonia, biofuels, etc. The order book and pipeline remain healthy and will drive revenue growth in coming years. Management has retained its guidance of ~10% revenue and PAT growth for FY24, along with ~3% margin in Turnkey Projects.

Outlook

We believe EIL’s long-term growth prospects remain intact given 1) healthy order book, 2) strong project pipeline, 3) diversification into decarbonization business, and 4) lean balance sheet. We estimate Revenue/PAT CAGR of 13.2%/21.6% over FY23-26E. The stock is currently trading at a PE of 18.8x/14.1x/12.5x FY24/25/26E. Upgrade to ‘Buy’.

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Engineers India - 13 - 11 - 2023 - prabhu