Accumulate Engineers India; target of Rs 165: Prabhudas Lilladher

Prabhudas Lilladher's research report on Engineers India

Engineers India Ltd (EIL) reported mix quarterly performance with revenue been flat YoY and EBITDA margins expansion of 276bps YoY to 8.5%. Order pipeline remain healthy from projects such as BORL- Refinery expansion, Private sector – Crude to Chemicals, Polymer projects etc. IOCLPetrochemical facility in Gujarat. EIL has been focusing on new age verticals (revenue stood at ~Rs630mn in FY23) like Hydrogen, Biofuel, Biomass etc. EIL is focusing on increasing its presence in exports markets such as Middle East, Nigeria, Algeria and few countries in Africa. Management guided for revenue growth of ~10% with consultancy margins in range of ~25-27% for FY24. Order inflows to be ~Rs45bn for FY24. EIL’s long term growth prospects remain intact given 1) healthy order book, 2) strong project pipeline (mainly from Petrochem orders), 3) diversification into newer verticals like hydrogen and 4) lean balance sheet.

Outlook

The stock is currently trading at PE of 20.5x/15.9x FY24/25E. We maintain Accumulate rating on stock with revised TP of Rs165 (Rs116 earlier), valuing it at PE of 17x FY25E (12x earlier) factoring in healthy order pipeline from petrochemical segment and focus on diversification into newer verticals (Hydrogen, Biofuel, coal gasification etc).

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