Buy Engineers India; target of Rs 290: Firstcall Research

“Engineers India (EIL), incorporated in 1965, is engaged in the business of providing engineering and related technical services for petroleum refineries and other industrial projects. The company has broadened its activities in other areas such as pipelines, petrochemicals, oil and gas processing, offshore structures and platforms, fertilizers, metallurgy and power. EIL has emerged as Asia's leading design and engineering company that offers complete range of project services. In order to offer its services, EIL has explored new areas such as highways and bridges, IT, airports, mass rapid transport systems, ports and terminals, power projects, non-conventional / renewable energy sources, specialist materials and maintenance services, intelligent buildings, water and urban development projects. The company has received ISO 9001:2000 certifications for quality management. Headquartered in New Delhi, company has branches offices located at Mumbai, Kolkata, Chennai and Vadodara. Internationally company’s offices are located at London, Abu Dhabi, Kuwait, Qatar, Malaysia and Australia.”

“EIL operates a wholly-owned subsidiary namely, EIL Asia Pacific Sdn Bhd in Malaysia and Certification Engineers International that is engaged in the business of undertaking independent certification and third party inspection assignments. The company has formed strategic alliances with various companies such as UKbased VAI Industries for iron and steel plants; Deutsche Montan Technologies GmbH of Germany for coke oven-by product plants/gas cleaning systems; IOCL (R&D) for technology and catalyst for DHT and hydrotreater projects in India; GAIL India for overseas projects in LPG extraction and Pipeline transfer and many more. EIL has set up 50:50 joint venture companies with Tata Projects viz., TEIL Projects for undertaking EPC projects for hydrocarbon, power and other sectors has already been incorporated. For executing EPC projects in UAE, the company has formed a JV with Tecnimont S.p.A., Italy.”

“Engineers India Ltd disclosed results for the quarter ended Dec 2011. Net sales for the quarter moved up 17% to Rs.7924.96 million as compared to Rs.6770.99 million during the corresponding quarter last year. During the quarter, the company has reported Net Profit increased to Rs.1512.61 million from Rs.1224.53 million in previous year same quarter. The Basic EPS of the company stood at Rs.4.49 for the quarter ended Dec 2011.”

“Expenditure for the quarter stood at Rs.6102.56mn, which is around 17% higher than the corresponding period of the previous year. Construction Material cost of the company for the quarter accounts for 32% of the sales of the company and stood at Rs.2575.42mn from Rs.1699.90mn of the corresponding period of the previous year. Sub contract Expenses decreased 12% YoY to Rs.1558.11mn from Rs.1772.13mn and accounts for 20% of the revenue of the company for the quarter. OPM and NPM for the quarter stood at 29% and 19% respectively from 28% and 18% respectively of the same period of the last year.”

“At the current market price of Rs.250.00, the stock is trading at 13.03 x FY12E and 10.98 x FY13E respectively. Price to Book Value of the stock is expected to be at 4.03 x and 2.95 x respectively for FY12E and FY13E. Earning per share (EPS) of the company’s earnings for FY12E and FY13E is seen at Rs.19.18 and Rs.22.78 Respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 28% and 21% over 2010 to 2013E respectively. During the quarter ended the robust growth of revenue increased by 17% to Rs.7924.96 million. During the quarter, the company has reported Net Profit increased to Rs.1512.61 million from Rs.1224.53 million in previous year same quarter. On the basis of EV/EBITDA, the stock trades at 8.77 x for FY12E and 7.39 x for FY13E. We expect that the company will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs 290 for medium to long term investment,” says Firstcall Research report.

Public holding more than 90% in Indian cos

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