Buy Engineers India; target of Rs 242: Prabhudas Lilladher

Prabhudas Lilladher's research report on Engineers India

Engineers India (EIL) reported 11.9% YoY decline in revenue due to weaker execution, but favorable revenue mix boosted gross margins by 1,100bps YoY to 55.5% and EBITDA margins by 703bps YoY to 12.8%. EIL has secured ~Rs72.7bn in order intake to date in FY25 and anticipates additional order from IOCL’s Paradip expansion. The company has already secured a Rs545mn contract for Phase 1 and holds L1 status for the Phase 2 package, expected to add Rs7bn in new orders. The total order book has expanded to over Rs114bn; however, turnkey execution has been subdued, making execution progress a critical focus for Q4FY25. Improved execution rates are expected to enhance operational efficiency and drive margin expansion. The project pipeline remains robust, spanning oil & gas, green hydrogen, biofuels, and infrastructure. Internationally, EIL continues to experience strong momentum in Abu Dhabi, with additional opportunities emerging in the Middle East and Algeria.

Outlook

We believe EIL’s long-term growth prospects remain intact given 1) strong order book and oil & gas project pipeline, 2) opportunities in energy transition & infrastructure, 3) growing exports business, and 4) lean balance sheet. The stock is trading at a P/E of 14.8x/12.6x on FY26/27E core EPS. We maintain ‘Buy’ rating with rolling forward SoTP-to Sep’26 (FY26E earlier) at derived TP of Rs242 (Rs247 earlier), valuing the Consultancy/Turnkey segments at 22x/10x (25x/10x earlier).