Buy Engineers India; target of Rs 139: Prabhudas Lilladher
Prabhudas Lilladher’s research report on Engineers India
Engineers India Ltd (EIL) reported good set of numbers for 1QFY20, led by higher contribution coming from Consultancy Segment. Revenue/PAT up 28%/43% YoY, mainly led by strong revenue performance in Consultancy segment which grew by 38% YoY at Rs4.4 bn (included Rs966mn on account of change in order) and margin expansion in Consultancy segment. Order inflow during the quarter stood at Rs9.4 bn against Rs832 mn in 1QFY19, taking order backlog to Rs114 bn (42% Consultancy). Management indicated strong hydrocarbon tender activities in international geographies like Middle-East, Bangladesh and Nigeria (Dangote). Order inflow for FY20 is expected to be Rs18 bn and indicated robust pipeline for FY21E. EIL management has maintained the guidance of 15% revenue growth in FY20 and maintained current margins. We are positive on the company as 1) We believe the company is key beneficiary of refinery capex in the country, 2) net cash balance sheet 3) healthy return ratios with RoE/RoCE of ~19% in FY21E. We expect EIL’s consolidated Revenue/PAT to grow at CAGR of 14%/15% over the next 2 years (FY19-21E).
The company also offers attractive dividend yield of 4%. The stock is currently trading at 15.4/13x FY20/FY21E. We maintain BUY rating on the stock with target price of Rs139 (18x FY21E).
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