Hold Engineers India; target of Rs 105: ICICI Direct

ICICI Direct's research report on Engineers India

Engineers India (EIL) reported strong Q1FY20 numbers led by higher-than-expected contribution from consultancy business coupled with strong margins. Revenues grew 28.2% YoY to Rs 734.9 crore. Consultancy and turnkey segment contributed 60.5% and 39.5%, respectively. Consultancy revenues grew 38% to Rs 444.5 crore while turnkey revenues jumped 15.7% to Rs 290.4 crore, YoY. Absolute EBITDA grew 61.5% YoY to Rs 139.4 core. This was due to healthy EBIT margins in consultancy segment. Consultancy and turnkey segments reported EBIT margins of 39.3% and 2.7%, respectively. Overall EBITDA margins came in at 19.0% vs. 15.1% YoY. Absolute PAT grew 43.2% YoY to Rs 124.1 crore.

Outlook

EIL’s book-to-bill is at healthy ~4.5x (order book at Rs 11,429 crore). We value EIL at 13.5x P/E on FY21E EPS of Rs 7.7 to arrive at a target price of Rs 105 per share and maintain HOLD rating EIL. Key risks: Any project related headwinds or delays in turnkey segment may affect revenue growth.