Buy Engineers India; target of Rs 247 Prabhudas Lilladher

Prabhudas Lilladher's research report on Engineers India

We revise our FY25/26E core EPS estimates by -3.8%/-1.8% factoring in lower margins in the Consultancy segment. Engineers India (EIL) reported 12.8% YoY decline in revenue and 347bps contraction in EBITDA margin to 8.2%. The company has secured Rs68.7bn worth of orders till date in FY25, and expects additional intake of Rs10-15bn from opportunities in the Turnkey business as well as IOCL’s Paradip expansion, where it is L1 in two consultancy packages. The order book has ramped up to over Rs120bn, but execution has been soft; hence, execution will be a key monitorable in H2. Higher rate of execution will lead to better efficiencies, enabling margin improvement. Overall, the project pipeline remains healthy across oil & gas, green hydrogen, biofuels, and infrastructure. On the international front, EIL continues to see opportunities in the Middle East, Nigeria, Algeria, and Guyana. 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.

Outlook

The stock is trading at a P/E of 28.2x/20.1x/16.8x on FY25/26/27E core EPS. We maintain ‘Buy’ rating with a revised SoTP-derived TP of Rs247 (Rs250 earlier), valuing the Consultancy/Turnkey segments at 25x/10x on FY26E EPS (same as earlier).