Buy Engineers India; target of Rs 89: Motilal Oswal

Motilal Oswal 's research report on Engineers India

Engineers India (ENGR)'s revenues were 14% higher than estimated; however, the lack of operating leverage led to a 16% miss in EBITDA. Margins in consultancy projects were weak at 14.3% v/s 39.3% in 1QFY20. Order inflows plunged 91% YoY to INR810m, with another INR160m worth of orders received thus far. Order inflows were primarily from the Hydrocarbon segment. The order book (OB) declined 20% YoY to INR91.2b, with OB/rev at 3.1x, the lowest in last four years. With superior execution and lower order inflows, a depleting order book remains a concern, although it is not alarming at this stage.

Outlook

On account of lower order inflows and a hazy outlook for FY21E, we reduce our FY21/FY22E EPS by 14%/5% and maintain our Buy rating, with TP of INR89 (prior: INR93).

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